[Senate Hearing 113-65]
[From the U.S. Government Publishing Office]



                                                         S. Hrg. 113-65

 
           SECURE RURAL SCHOOLS AND PAYMENT IN LIEU OF TAXES

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                                   TO

EXAMINE THE OPTIONS AND CHALLENGES RELATED TO POSSIBLE REAUTHORIZATION 
 AND REFORM OF TWO PAYMENT PROGRAMS FOR LOCAL GOVERNMENTS-THE RECENTLY 
 EXPIRED SECURE RURAL SCHOOLS AND COMMUNITY SELF-DETERMINATION ACT AND 
                      THE PAYMENT IN LIEU OF TAXES

                               __________

                             MARCH 19, 2013


                       Printed for the use of the
               Committee on Energy and Natural Resources


                  U.S. GOVERNMENT PRINTING OFFICE
82-563                    WASHINGTON : 2013
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing Office, 
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Printing Office. Phone 202ï¿½09512ï¿½091800, or 866ï¿½09512ï¿½091800 (toll-free). E-mail, [email protected].  


               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                      RON WYDEN, Oregon, Chairman

TIM JOHNSON, South Dakota            LISA MURKOWSKI, Alaska
MARY L. LANDRIEU, Louisiana          JOHN BARRASSO, Wyoming
MARIA CANTWELL, Washington           JAMES E. RISCH, Idaho
BERNARD SANDERS, Vermont             MIKE LEE, Utah
DEBBIE STABENOW, Michigan            DEAN HELLER, Nevada
MARK UDALL, Colorado                 JEFF FLAKE, Arizona
AL FRANKEN, Minnesota                TIM SCOTT, South Carolina
JOE MANCHIN, III, West Virginia      LAMAR ALEXANDER, Tennessee
CHRISTOPHER A. COONS, Delaware       ROB PORTMAN, Ohio
BRIAN SCHATZ, Hawaii                 JOHN HOEVEN, North Dakota
MARTIN HEINRICH, New Mexico

                    Joshua Sheinkman, Staff Director
                      Sam E. Fowler, Chief Counsel
              Karen K. Billups, Republican Staff Director
           Patrick J. McCormick III, Republican Chief Counsel


                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Baucus, Hon. Max, U.S. Senator From Montana......................     6
Bennet, Hon. Michael F., U.S. Senator From Colorado..............     3
Fennell, Anne-Marie, Director, Natural Resources and Environment 
  Team, Government Accountability Office.........................    18
Haggerty, Mark, Policy Analyst, Headwaters Economics, Bozeman, MT    58
Haze, Pamela K., Deputy Assistant Secretary for Budget, Finance, 
  Performance and Acquisition, Department of the Interior........    14
Heller, Hon. Dean, U.S. Senator From Nevada......................     3
Landrieu, Hon. Mary, U.S. Senator From Louisiana.................     6
Manuel, Athan, Director, Lands Protection Program, Sierra Club...    80
Murkowski, Hon. Lisa, U.S. Senator From Alaska...................     4
O'Laughlin, Jay, Professor of Forestry & Policy Sciences, and 
  Director, Policy Analysis Group, College of Naturan Resources, 
  University of Idaho, Moscow, ID................................    67
Pearce, Paul J., President, National Forest Counties and Schools 
  Coalition, Stevenson, WA.......................................    44
Tidwell, Thomas, Chief, Forest Service, Department of Agriculture     9
Wyden, Hon. Ron, U.S. Senator From Oregon........................     1
Yates, Ryan R., Associate Legislative Director, Legislative 
  Affairs Department, National Association of Counties...........    50

                                APPENDIX

Responses to additional questions................................    83


           SECURE RURAL SCHOOLS AND PAYMENT IN LIEU OF TAXES

                              ----------                              


                        TUESDAY, MARCH 19, 2013,

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:02 a.m. in 
room SD-366, Dirksen Senate Office Building, Hon. Ron Wyden, 
chairman, presiding.

       OPENING STATEMENT OF HON. RON WYDEN, U.S. SENATOR 
                          FROM OREGON

    The Chairman. Committee will come to order. Senator 
Murkowski is on her way. We have gotten permission to begin.
    I'm very pleased that the distinguished Chairman of the 
Finance Committee, Senator Baucus, is here.
    Let me just make a brief opening statement.
    Today the committee is going to look at options for 
reauthorizing and reforming the Secure Rural Schools and 
Community Self-Determination Act and the Payment in Lieu of 
Taxes program. Both of these programs are absolutely critical 
to rural America. Today we will have a number of knowledgeable 
witnesses who will talk about the funding for these programs as 
well as possible reforms that could be considered in extending 
and updating them.
    In the 1980s years of unsustainable timber harvests 
collided with renewed public concern over clean air and water 
and endangered species. This collision left our country with a 
broken forestry system and produced the worst of 2 worlds, an 
inadequate timber harvest and inadequate protection for our 
public lands. Our timber communities lost jobs while 
conservation was more often handled by lawyers and judges 
rather than foresters and biologists.
    That's why in 2000 along with our former colleague, Larry 
Craig, I authored the Secure Rural Schools and Community Self-
Determination Act to provide a lifeline for timber dependent 
communities across the Nation.
    PILT, Payment in Lieu of Taxes, has also existed to help 
provide more stable funding to counties containing Federal 
land, but it has suffered a number of funding shortages over 
the years.
    Now the funding for Secure Rural Schools expired last year 
and full funding for the PILT program ends this year. So we now 
have across the country cash-strapped, rural communities facing 
deadlines this spring to decide about retaining teachers, 
whether or not to close schools, what to do about law 
enforcement and roads and other basic services. So it is 
especially important that Congress act quickly.
    I'm especially pleased that our colleague, Chairman Max 
Baucus, who chairs the Finance Committee, on which I'm honored 
to serve, is here this morning. Chairman Baucu, colleagues, has 
been there again and again and again for the Secure Rural 
Schools program. I just want people to know as we begin this 
debate that looking back on the odyssey of the Secure Rural 
Schools program, it would have been hard to keep this program 
afloat without the good work Chairman Baucus has been doing.
    So Chairman Baucus, thank you very much for all the past 
help and the assistance that you have pledged going forward.
    I also want to make clear at this time that a short term 
extension of the Secure Rural Schools program is not a long-
term solution for our hard-hit, resource-dependent communities. 
So our job now is to look for a long-term solution as well. 
That means focusing in 2 areas.
    First, it's way past time to get our people back to work in 
the woods and increase the timber harvest off Federal lands. 
More good-paying, private sector jobs are needed in resource-
dependent communities with Federal land and Federal waters. 
This is something I believe can be done consistent with our 
environmental laws.
    That's why I'm working with Senator Murkowski, Senator 
Landrieu, and others on a more comprehensive approach to share 
revenue from Federal land and waters with resource dependent 
communities. In effect what we are talking about is pursuing 
this on a dual track. Boosting timber cuts and providing a 
safety net that provides for schools, roads, and police in 
resource-dependent communities and then our bipartisan 
coalition will also support reauthorizing the Secure Rural 
Schools payment program while looking for a long-term solution 
that understands that we have to increase our timber harvests, 
look to jobs in communities that abut Federal land and Federal 
water and protect our environmental heritage. With respect to 
Federal Forests, that means in some areas we would increase the 
harvest and in some areas we would conserve our special 
treasures.
    The members of this committee have, over the last 15 years, 
made it a priority to build bipartisan coalitions to break the 
bureaucratic log jams on public lands management.
    That's what happened with Secure Rural Schools.
    That's what happened with the Healthy Forest Restoration 
Act.
    That's what we've seen in Eastern Oregon where the 
environmentalists and timber industry came together.
    I do want to state that while we are going to look at 
further hearings to focus on forest management, we understand 
that experts are telling us that it is not possible to cut 
enough trees to produce historic levels of funding in rural 
communities and comply with the multiple uses of our Federal 
Forests that our communities want and meet our bedrock 
environmental laws. So the challenge is to find a way to pursue 
on this dual track a short-term and a long-term solution while 
looking at some fresh approaches and rejecting those approaches 
that have not worked in the past.
    Short cuts like selling off Federal lands or ignoring 
environmental laws cannot be expected to pass the Senate or be 
signed by the President. These ideas have failed for more than 
20 years. To create a realistic solution for increased forest 
management, any solution is going to require a broad coalition 
with buy-in from all sides that has been shown to work in the 
past.
    I believe that as we look to cut more timber on Federal 
forest lands, we can do it in a way that creates jobs, saves 
mills, and makes our forests healthier and more resistant to 
wildfire, insects, and disease. The committee is going to work 
in a bipartisan way to achieve this goal of upping the timber 
harvest while protecting old growth stands, clean water, and 
essential habitats. We believe we can do it in a bipartisan way 
by streamlining the bureaucracy around forest management, 
promoting tourism and recreation, and increasing biomass energy 
development.
    Rural counties with Federal lands and waters deserve to be 
able to staff their schools, fund law enforcement, and maintain 
the roads required by the use or preservation of these lands. 
My policy to end the perpetual roller coaster from revenue 
sharing includes new initiatives to create private sector jobs, 
protect the environment and most of all, make sure that rural 
America does not become a ghost town. It's time for a broader 
revenue sharing effort that can provide affected States and 
communities with a share of the money generated from resource 
extraction from nearby Federal lands and Federal waters.
    Senator Murkowski, our ranking member, has a great interest 
in this issue as does Senator Landrieu. Let me recognize you 
now for your opening statement, Senator Murkowski.
    [The prepared statements of Senator Heller and Senator 
Bennet follows:]

    Prepared Statement of Hon. Dean Heller, U.S. Senator From Nevada

    Over 90 percent of all federally-owned land is located in western 
states. For westerners, the federal government's ownership of vast 
quantities of land not only limits the self-determination and economic 
development, it also robs local communities of property tax revenues 
and the taxes associated with private business development. As a 
result, federal land ownership forces westerners to pay higher property 
taxes to pay for essential services such as law enforcement, health 
care, and education.
    Nowhere is this more on display than in Nevada, where 87 percent of 
our land is controlled by the federal government. In Nye County, only 
250,000 acres of the 11,640,196 acres are private lands. In Lincoln 
County, only 142,952 of 6,804,733 acres are private lands. And the list 
goes on.
    The PILT program is necessary to help maintain and improve the 
health and vitality of our public lands communities, as well as to help 
local communities to meet obligations and expectations of visitors to 
federal lands.
    While I am deeply aware of the limitations presented by our current 
fiscal situation, I remain firm in my belief that the federal 
government has a responsibility to fulfill its obligations to the 
counties which it denies a local tax base.
                                 ______
                                 
      Prepared Statement of Hon. Michael F. Bennet, U.S. Senator 
                             From Colorado

    I write to applaud the Senate Energy and Natural Resources 
Committee for scheduling tomorrow's hearing entitled, ``Keeping the 
Commitment to Rural Communities.'' As you know, the Secure Rural 
Schools (SRS) and Payments in Lieu of Taxes (PILT) programs are 
lifelines for rural counties across the West.
    PILT, in particular, is vitally important to my home state of 
Colorado. Dozens of Colorado counties contain high percentages of 
federal public land--land on which they are unable to collect property 
tax revenue. PILT serves to compensate partially for this foregone 
revenue, and the program's resources are employed to provide essential 
community services like road maintenance and emergency responders.
    Failure to renew PILT will lead to job losses in Colorado and even 
potential insolvency for some of our communities. I appreciate the 
Committee's attention to this important matter and stand ready to help 
as you seek a long-term solution to this persistent problem.

        STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR 
                          FROM ALASKA

    Senator Murkowski. Thank you, Mr. Chairman. I appreciate 
that you have scheduled this hearing as early into this 
particular Congress as you have. As you know it's an 
exceptionally important issue for many of our States and truly 
a priority here.
    The Federal compensation programs that we're talking about 
today, whether Secure Rural Schools or Payment in Lieu of 
Taxes, have been extraordinarily valuable in our rural 
communities, certainly in my State of Alaska. I know that these 
programs are important to you, certainly to you, Senator 
Baucus, and I also appreciate your leadership and your efforts 
as we have tried to find the dollars necessary to continue the 
very important funding. We're going to have to count on you 
once again to help us out with that.
    But we recognize the challenges. I would certainly concur 
with the chairman here, that we need to find longer term 
solutions so that we don't go from year to year. The anxiety, 
the stress, that I hear from my communities.
    The community of Wrangell, where I went to elementary 
school, is a community where 64 percent of their budget for the 
school comes from Secure Rural Schools funding. When they don't 
know where 64 percent of their budget is going to be coming 
from on a year to year basis, it causes a great deal of stress.
    I want to mention first Payment in Lieu of Taxes program. 
The PILT program, of course, is permanent. So we're not 
concerned about the program expiring. But what we are concerned 
about is the level at which the program is funded.
    Over the last several years when we reauthorized and 
extended Secure Rural Schools we also turned PILT into a 
mandatory funded program. I think this was primarily done to 
build the political support to reauthorize and extend Secure 
Rural Schools. PILT was created in 1976 by Congress because we 
changed our Federal land policy from one that was focused on 
disposal to one that was focused on retention. These payments 
are literally payments in lieu of taxes to compensate our local 
governments for the loss in tax revenue caused by this change 
in policy and how PILT is funded in the future whether 
programmatic changes are needed and its relationship to Secure 
Rural Schools are certainly something that we need to explore.
    Secure Rural Schools, unlike PILT, was largely a 
replacement program for the receipt sharing programs whether 
it's the Forest Service payments to States and the Bureau of 
Management that Oregon and California have for their payments. 
These payments made under these programs were historically from 
receipts generated by timber sales for roads and school 
purposes. But I think we recognize that they were never 
intended to be a permanent entitlement program, but more 
specifically a temporary, short term bridge to allow the 
communities to transition to the new economic reality that was 
forced upon them by environmental policies that were designed 
to halt timber harvesting.
    But if you are a community, like Ketchikan, where I was 
born down in Southeast Alaska, Ketchikan, their private taxable 
lands within the Ketchikan gateway borough are 0.3 percent, 0.3 
percent. So if you have no other place to go.
    If 96.5 of the percent of the land in your borough is held 
by the Federal Government.
    The State has 1.3 percent.
    The local government has 0.3 percent.
    There is 0.3 percent that is taxable land. So when you say 
you've got this Federal policy that says you can't harvest 
within the Tongass because we're just saying you can't harvest 
in the Tongass. You have no place to go for your tax base. We 
say, well this is just going to be a temporary program for you 
until you can transition.
    The question is what do you transition to?
    Where do you go?
    Of course, Chief Tidwell and I have had many, many 
conversations about where we go from there.
    But our counties, our boroughs, our other communities, have 
received payments for more than a decade now. For some of your 
counties in Oregon and Washington, Northwest California, who 
receive the Spotted Owl payments, they've been seeing these 
Secure Rural Schools payments for more than 2 decades. Now 
again, we're talking about the need for another short term 
extension, but I think we all know, I mean we're having budget 
conversations this week. It's on everybody's mind.
    The Federal Government, the Federal Government is broke 
here. We can't continue to pay counties to not utilize the 
lands within their boundaries. Mr. Chairman, you have 
appropriately suggested where we need to go with this.
    You need to be able to access the resources that are on 
your lands. We either need to utilize our Federal lands to 
generate the revenue and the jobs for our rural communities or 
we should divest the Federal Government of those lands and let 
the States or the counties, the boroughs, manage them.
    Mr. Chairman, you've suggested that that probably isn't 
going to enjoy support within the Congress. Maybe that's true. 
But boy, oh boy, we've got to have something here. You've got 
to have some way for these communities to survive otherwise, I 
think, they do go the way that you have suggested that they 
might, which is to turn into ghost towns. That's not a solution 
that I think is one that we would support.
    We do need to address, head on, the fact that federally 
owned land has a profound impact on the fiscal and economic 
base of a community as well as the social fabric. So we've got 
a good panel here this morning. I appreciate that we're led off 
by Senator Baucus on this issue.
    But Mr. Chairman, I look forward to working with you, with 
Senator Landrieu and so many others as we try to find a longer 
term solution for these communities in these rural areas that 
are impacted so profoundly.
    Thank you, Mr. Chairman.
    Senator Landrieu. Can I just----
    The Chairman. Yes, of course, Senator. If--I know Chairman 
Baucus has his hearing. I know Senator Landrieu would like to 
make a comment or 2.

         STATEMENT OF HON. MARY LANDRIEU, U.S. SENATOR 
                         FROM LOUISIANA

    Senator Landrieu. I'd just like to make 30 seconds while 
Senator Baucus is here. Then I'll submit the rest of my 
statement for the record.
    But I want to thank you, Mr. Chairman and the ranking 
member for hosting a series of hearings that might find a 
really, a long term solution for the problems that both 
interior States, western States and coastal States are 
experiencing which is the very disjointed and hard to 
understand sharing or not sharing of these revenues with the 
communities that actually are hosting and needing the support 
from the production of these revenues.
    So I'll look forward to working with Senator Baucus and 
both of you on finding a way forward. Because I think both of 
you expressed the real need of communities where Federal 
policies have severely impacted their abilities to produce 
their own revenues and the need for some sort of partnership 
and sharing to produce the natural resources in a wise way, 
respecting the environment, but also respecting the needs of 
Americans to work and to remain competitive in this world. I 
think we can find the way forward.
    So thank you very much.
    The Chairman. Thank you, Senator Landrieu.
    I think the point of finding the way forward, having been 
to both of your communities in the last few months, I'm just 
struck at how there's this common thread wherever there's 
Federal land and Federal water. People are looking to find ways 
to create private sector jobs, protect their treasures, and 
come together. At one point I was struck in your State, Senator 
Landrieu, listening to people around the table the main 
difference between the folks around the table in Louisiana and 
the folks sitting around the table in Southern Oregon is your 
constituents had different accents than mine. But other than 
that they were looking for the same kind of hope, jobs, 
environment and coming together.
    With that, Chairman Baucus, I know you've got a hearing. We 
are so appreciative of the fact that you have been so committed 
to our rural communities. We would not have made it through 
those--that odyssey of authorizations over the years without 
your being in our corner.
    So please proceed. Thank you again for your help.

           STATEMENT OF HON. MAX BAUCUS, U.S. SENATOR
                          FROM MONTANA

    Senator Baucus. Thank you very much, Mr. Chairman. I 
appreciate that.
    Senator Murkowski, Senator Landrieu, thank you all 3 and 
all the other members of the committee.
    I'd also like to welcome Thomas Tidwell. I'm very happy 
he'll be testifying later this morning.
    Even more importantly we have a fellow Montanan here, Mark 
Haggerty. He is an expert on policies affecting public land 
use. He's sitting just a couple rows behind me. You'll hear 
from him a little bit later. Mark is from Bozeman, Montana, one 
of the most beautiful spots, I think, in the whole world.
    We're here today to discuss 2 programs that support jobs, 
Montana jobs and other jobs in counties where there's a lot of 
Federal land, Secure Rural Schools and Payment in Lieu of 
Taxes. These obviously are counties that contain a lot of 
Federal land. With a lot of Federal land they face a much lower 
tax base and also less natural resource revenue.
    I remind everyone that this is America's lands. All 
Americans own Federal land. Americans use National Forest 
System land, BLM land, other Federal land. Not only the people 
in the communities use those lands but other Americans all 
across the country, especially when they're taking their family 
on vacation, use not only those lands, but adjacent areas, the 
roads in those counties that the county commissioners are 
trying desperately to finance.
    If they don't have the tax base, it's pretty hard for them 
to finance those roads and other amenities that the local folks 
use, but also people from around the country use. That's all 
the more reason why this is really--there's a need for a 
Federal solution to this. We all know what it's been.
    Last year Congress overwhelmingly passed both Payment in 
Lieu of Taxes as well as Secure Rural Schools because it is 
needed nationwide. More needed probably in those counties that 
have a lot of Federal land included in the tax base. But it's 
also needed nationwide because this is a really, in a real 
sense of the term, America's program.
    When I talk to county commissioners, you know, they all 
want to do the right thing. They run for office just like we. 
In many respects they've got a tougher job than we. They're so 
close to the people.
    They talk to me. Max, we just need a bill to get some 
revenue. So we can maintain roads, etcetera.
    In one county, for example, a bit of it is--74 percent 
Federal. Just imagine you've got--when 74 percent of your 
county at one, is pretty populous, a county that has a lot of 
people in it. Seventy-four percent of your county is Federal 
land. It's hard to raise the property tax rate revenue to 
support the services there.
    People like Todd Devlin. Todd Devlin is a county 
commissioner from Prairie County. Todd makes the same point to 
me. I note these points are points that you've all heard when 
you talk to your people in your home States as well.
    Senator Murkowski, up clear in Alaska, I can't think of a 
State that's got more Federal land than yours. So, obviously 
it's--what's something you hear about constantly.
    The question is how do we pay for this?
    Last year we were able to cobble together a few provisions 
to help pay for it. It was about $676 million price tag, Secure 
Rural Schools plus PILT. We're up to the challenge. We'll find 
other ways to make sure we can finance it another way.
    Why is that important?
    Because this stuff is at neutral. That means there's not 
one thin dime owed to the Federal taxpayers by providing for 
Secure Rural Schools and PILT payments.
    I might remind all of our--everybody listening too that 
this is non-partisan. While we have fiscal deadlocks around 
here, we stand to get a bit partisan. This is not one of those.
    This is one where Members of Congress, both sides of the 
aisle, work together. It's not a partisan issue whatsoever. I 
think that's the reason last year it got a strong vote. This 
year I know it will also get another strong vote.
    Clearly we have to find the revenue. We'll work hard to try 
to find a revenue in the least oppressive way. I'm not sure 
what that is, but the tax code is pretty big with lots of 
different futures to it. In fact it's so big that lots of folks 
want to, so called, broad the base and get rid of some of those 
tax expenditures.
    Be that as it may, I pledge that I'll work very closely 
with you. This is so important to my State. It's so important, 
I know, to your States and many other States. Working together, 
it's all teamwork. We'll find a way to finance this so we can 
get it done.
    You made a very good point, Mr. Chairman, about a longer 
term solution. There are way too many short term solutions here 
in the Congress. It's just--the years that I've been here it's 
just programs that get compressed and compressed and compressed 
in shorter periods of time.
    There were over 120, about 100 provisions in the code, tax 
code, we call extenders. They last about a year, 18 months. It 
just turned out that way.
    On a highway bill authorization is just, as well know, are 
very short term now. They used to be 5, 6 years. The farm bill 
used to be 5 years. It's now, you know, about a year. We've got 
extensions. Everything is extended.
    I did not come here to be an extender Senator. I'm sure you 
did not come here to be extender Senators. I didn't come here 
to be a maintenance Senator, neither did you, I'm sure. You 
came here to do stuff. Not be just spend all our time waiting 
behind the wheel, you know, wrapped around the axle as we try 
to just extend things.
    It takes a lot of time, a lot of time, simply, to extend 
something for a year, a lot of time. The reason it takes so 
much time is because usually it requires revenue. You've got to 
find revenue someplace to pay for an extender, to pay for 
something, to pay for SRS, to pay for PILT. It's not easy to 
find new revenue to do this.
    I have some ideas how to make this longer term. I urge that 
we work together to try to compare notes to try to find ways to 
accomplish that objective. But I strongly, strongly urge you as 
you work into reauthorize these 2 programs to also pay ordinate 
attention and just thinking out of the box, creatively, figure 
out a way to make this dog gone thing longer term so there's 
more certainty predictability for county commissioners, for 
folks at home, for the Forest Service, other Federal agencies, 
so they don't have to keep going back every year, every year 
voting it out, voting it out.
    Also it means we can devote a lot of our time doing some 
other things, knowing that we've taken care of SRS, taken care 
of PILT for a while, not permanently, clearly, but at least 
indefinitely so we can, again, move onto something that's else 
in addition to making sure our people are taken care of with 
these 2 programs.
    Thank you, Mr. Chairman.
    The Chairman. Mr. Chairman, thank you very much. I'm struck 
with your point about the teamwork issue. Of course everybody 
came in to work today. They filled out their brackets for March 
Madness. Of course they had the Oregon Ducks in the Final 4.
    [Laughter.]
    The Chairman. We were happy about that.
    Your point about teamwork is absolutely right. But if you 
talk about teamwork over these last 14 years, there's somebody 
we had to give the ball to when the game was on the line. That 
was you. I mean, you stepped up for this program again and 
again and again. You gave a lot of hope to rural communities a 
few weeks ago when you announced that you'd help us get that 
short-term program.
    So teamwork, as you said, is what it's about. But we're 
very glad that you've been willing to take the ball when----
    Senator Baucus. Thank you, Chairman. I neglected to give 
you sufficient praise. You are working very, very hard on this.
    Whenever I think of Secure Rural Schools and PILT, I also 
think of you.
    The Chairman. We're going to stay on in your point about 
trying some fresh approaches. That's what my colleagues have 
been doing.
    I know Chairman Baucus? time is tight. Do either of you 
have anything you'd like to ask?
    Senator Murkowski. Just thank you.
    Senator Baucus. Thanks for all you're doing. Appreciate it.
    The Chairman. Chairman, thank you.
    Alright our next panel will be the Honorable Thomas 
Tidwell, Chief of the Forest Service.
    Pamela K. Haze of the Department of Interior, Deputy 
Assistant Secretary for the Budget.
    Anne-Marie Fennell, with the Government Accountability 
Office.
    We thank all of you. Chief, let me have you begin to be 
followed by Ms. Haze and Ms. Fennell.
    Chief, I just want to say as we start your presentation how 
much we've appreciated your professionalism and assistance for 
this committee. Again and again, you've helped us try to come 
up with creative approaches. As you know, these issues are not 
for the faint-hearted.
    I mean in rural communities, particularly when I think 
about places in Coos County and rural Lane County, you know, 
all over are Curry County, Josephine County, all over our 
State. You just walk an economic tightrope trying to survive. 
So these are not abstract issues.
    You've helped us come up with approaches to, at least, give 
us an opportunity to get both the short and long-term 
solutions. So we welcome your presentation. We'll make your 
prepared remarks a part of the hearing record in their 
entirety.
    Why don't you start, Chief. We'll just proceed with our 
witnesses.

STATEMENT OF THOMAS TIDWELL, CHIEF, FOREST SERVICE, DEPARTMENT 
                         OF AGRICULTURE

    Mr. Tidwell. Mr. Chairman, thank you.
    Ranking Member Murkowski, it's great to see you again.
    Members of the committee, thank you for the opportunity to 
be here to present the views of the U.S. Department of 
Agriculture on Secure Rural Schools and the Community Self-
Determination Act.
    The Administration strongly supports ways that the Federal 
Government can support economic activity in rural America and 
fulfill its obligation to share receipts from these public 
lands whether it's from the PILT payments, sharing with States 
the mineral revenues from public lands, to the land use fees, 
the timber receipts, the grazing receipts that contribute to 
Secure Rural School payments.
    Secure Rural Schools has been a key program for 729 
countries, boroughs and townships. Mr. Chairman and members of 
the committee, I just want to personally thank you for your 
leadership around this issue for the last few years. It has 
made a significant difference in these local economies.
    The Administration supports reauthorization of Secure Rural 
Schools with mandatory funding. Secure Rural Schools fulfills 
the Federal Government's obligation to compensate local 
governments for the tax exempt status of national forests to 
help fund public schools and county roads through stable, 
dependable payments that the counties and boroughs can rely on. 
Also this has really helped to sustain and diversify local 
economies.
    But it's much more than that. Title II and Title III allow 
counties to dedicate up to 15 to 20 percent of their payments 
for a variety of projects.
    Title II provides funding for projects like thinning on 
national forests to reduce the threat of wildfire to things 
like integrated weed control that benefits all lands.
    Title III helps counties fund search and rescue and 
provides funding for county planning to reduce wildfire threat 
to communities.
    Although recreation is now the largest economic activity on 
the national forests and it contributes over 200,000 jobs and 
$13.5 billion to the GDP. The number of visitors that recreate 
on the national forests definitely increases the county's cost 
for search and rescue programs. With the record fire seasons, 
that I believe will continue, county investments into community 
wildfire protection plans to reduce the threat of wildfire, 
it's essential.
    So all of the Secure Rural School programs from the 
payments for roads and schools to the projects on the national 
forest to the assistance provided to counties for wildfire 
protection, all of these programs have been invaluable to the 
economic sustainability of our rural communities. But an 
additional benefit has come from the Resource Advisory 
Committees, the RACs, that are required by Secure Rural 
Schools. These are the RACs that make recommendations for the 
projects on national forest lands. Because of the requirement 
that these RACs have a diverse representation, their project 
recommendations have been implemented with very few appeals 
over the last 12 years.
    I'm not sure you realize what you started with Secure Rural 
Schools. But in my view it was the start of the collaborative 
processes that we benefit from today all across the country 
where diverse interests are working together to support active 
management of our national forests. It is through these 
collaborative processes that we are able to continue to 
accelerate the restoration on our national forests to improve 
the fisheries, maintain trails, reduce soil erosion, improve 
wildlife habitat and increase the biomass, the saw timber 
harvested from the national forests.
    With 65 to 83 million acres of our national forests that 
are in need of some form of restoration, we recognize the need 
to increase the pace of restoration to ensure that our forests 
are more resilient to disturbance events like floods, wind 
storms, drought, insect and disease outbreaks and wildfire. 
Stable, guaranteed payments that counties can depend on, it's 
essential. But I can tell you in the long run these RACs have 
provided a key benefit and are why today we are able to 
accelerate the restoration on our national forests. To restore 
these watersheds that continue to provide clean water for 20 
percent of this Nation, to maintain the recreational settings 
that all support the economic activity and increase jobs in 
rural America.
    We want to work with the committee to reauthorize the 
Secure Rural Schools program, a program that has successfully 
strengthened our rural economics, and developed important 
collaborative working relationships with diverse interests that 
care about how their forests are managed.
    I want to thank you again for the opportunity to discuss 
the Secure Rural Schools program. I look forward to your 
questions.
    [The prepared statement of Mr. Tidwell follows:]

Prepared Statement of Thomas Tidwell, Chief, Forest Service, Department 
                             Of Agriculture

                               CONCERNING

    Mr. Chairman and Members of the Committee, thank you for the 
opportunity to present the views of the U.S. Department of Agriculture 
regarding the Secure Rural Schools and Community Self-Determination Act 
of 2000 (the ``Secure Rural Schools Act''), as amended and reauthorized 
in 2008 (P.L. 110-343) and again for fiscal year 2012 (P.L. 112-141). 
The administration supports reauthorization of the Secure Rural Schools 
Act with mandatory funding. Although some receipts for Payment In Lieu 
of Taxes (PILT) payments are generated on National Forest System (NFS) 
lands, management of the program is the responsibility of the 
Department of the Interior (DOI). We defer testimony on this program to 
DOI.
            Overview
    Since 1908, when Congress enacted what is commonly known as the 
Twenty Five Percent Fund Act (16 U.S.C. 500) to compensate local 
governments for the tax-exempt status of the national forests, the 
Forest Service has shared 25 percent of gross receipts from national 
forests with states. The so-called ``25 percent payments'' were made to 
the states for the benefit of public schools and public roads in the 
counties in which national forests are located. The allocation of the 
funds between schools and roads varies according to state laws. The 
receipts, on which the 25 percent payments are based, are derived from 
timber sales, grazing, minerals, recreation and other land use fees.
    In the late 1980s, 25 percent payments began to decline 
significantly and fluctuate widely. This was largely due, especially in 
western states, to a significant decline in timber sales. The declines 
and fluctuations created hardships for local officials charged with 
providing services to communities in and near the national forests.
    The decline in timber sales, and corresponding reduction in the 25 
percent payments, was particularly acute in northern California, 
Oregon, and Washington. To address this concern, Congress provided 
``safety net payments'' to counties in California, Oregon, and 
Washington for fiscal years 1994 to 2003. The safety net payments were 
enhanced payments structured to decline annually and intended to help 
the counties transition to the reduced amount of the 25 percent 
payments.
    Before the safety net payments expired, Congress enacted the Secure 
Rural Schools Act (P.L. 106-393), which provided the option of 
decoupling the payments from receipts, by authorizing enhanced, 
stabilized payments to states for fiscal years 2000 through 2006. The 
Secure Rural Schools Act provided eligible counties with two options. A 
county could elect to continue to receive its share of the State's 25 
percent payment, which fluctuated based on receipts, or the county 
could elect to receive a share of the State's ``full payment amount'', 
which was a stabilized amount. A county that elected to receive a share 
of the State's full payment amount was required to allocate 15 to 20 
percent of its share of the payment to Title II (special projects on 
federal lands) or to Title III (county projects), or to return that 
amount to the Treasury. Title II funds could only be spent on projects 
benefitting the national forests that were recommended by resource 
advisory committees (RACs). As part of the initial implementation of 
the Act, the Forest Service established 55 RACs; by 2012 there were 118 
RACs across the country. The remainder of the county's share of the 
payment (80 to 85 percent) was required to be spent for Title I 
purposes (for public schools and roads.)
    Congress appropriated funds for payments to states for fiscal year 
2007, and in October 2008, amended and reauthorized the Secure Rural 
Schools Act for fiscal years 2008 through 2011 and again in 2012. With 
a few notable exceptions, the Secure Rural Schools Act reauthorizations 
mirrored the 2000 Act. The primary change in 2008 was a new formula for 
the stabilized State payment, which includes a ramp-down of funding 
each year. In addition, the 2008 reauthorization amended the Twenty-
Five Percent Fund Act to reduce the fluctuations in the 25 percent 
payments. The 25 percent payments are now calculated as the rolling 
average of the most recent seven fiscal years' 25 percent payments.
    The last Title I and Title III payments under the Secure Rural 
Schools Act for fiscal year 2012 have been made. In 2012, approximately 
74 counties elected to receive a share of the State's 25 percent 
payment (based on receipts), and approximately 655 counties opted to 
receive a share of the State Payment (enhanced, stabilized). Payments 
to States for the Forest Service under the Secure Rural Schools Act for 
fiscal year 2012 total $305,939,381.
    All together, the Forest Service has made payments to 41 States and 
Puerto Rico to benefit more than 729 counties, boroughs, townships and 
municipalities. Unless the Secure Rural Schools Act is reauthorized, 
beginning with the payment for fiscal year 2013, States will receive 
the 25 percent payment calculated using the new formula based on a 
seven-year rolling average of 25 percent payments. The total of 25 
percent payments for allStates is projected to be approximately $58 
million for fiscal year 2013.
    The Secure Rural Schools Act has 3 principal titles. The U.S. 
Forest Service defers to the Department of the Interior for Secure 
Rural Schools' activities undertaken by that agency on the Oregon and 
California Railroad Grant Lands (O&C Lands).
            Title I-Secure Payments for States and Counties Containing 
                    Federal Land
    Title I of the Secure Rural Schools Act, as reauthorized, provided 
the formula for the State Payment for fiscal years 2008 through 2011 
with a one year reauthorization for fiscal year 2012. An eligible 
county's adjusted share of the State Payment was determined by a 
complex calculation involving multiple factors including acres of 
national forest, the average of three highest 25 percent payments from 
1986 through 1999, and the county's annual per capita personal income. 
The formula reduces the total payments to all States by approximately 
10 percent of the preceding year for 2008 to 2011 and by 5 percent of 
the preceding year for 2012. Eight States (California, Louisiana, 
Oregon, Pennsylvania, South Carolina, South Dakota, Texas, and 
Washington) received a transition payment in lieu of the State Payment 
for fiscal years 2008 through 2010. The transition payment was based on 
the fiscal year 2006 payment and declined by about 10 percent per year.
    The Secure Rural Schools Act directs that the majority of the State 
Payment be used to help fund county schools and roads. This portion of 
the payment is commonly referred to as the Title I payment and has 
averaged about 85 percent of the total State Payments to date. For 
fiscal years 2008 through 2012, Title I funds provided to States 
totaled nearly $1.7 billion.
            Title II-Special Projects on Federal Land
    An eligible county has the option to allocate part of its share of 
the State Payment under Title II for projects that maintain existing 
infrastructure or enhance the health of ecosystems on national forests 
and support local economies. Title II provides for the establishment of 
RACs to review and recommend projects. The Secure Rural Schools Act as 
reauthorized added to the duties of the committees and expanded the 
interests represented by members.
    Title II projects enhance forest ecosystems; restore and improve 
the health of the land and water quality; and protect, restore and 
enhance fish and wildlife habitat. Examples are maintenance or 
obliteration of roads, trails, and infrastructure; improvement of soil 
productivity; stream and watershed restoration; control of noxious and 
exotic weeds; and re-establishment of native species. These projects 
provide employment in rural communities and an opportunity for local 
citizens to advise the Forest Service on projects of mutual interest 
that benefit the environment and the economy. For fiscal years 2008 
through 2012, Title II funds totaled $204 million for projects 
recommended in more than 300 counties.
            Title III-County Funds
    Funds allocated by a county under Title III may be used on county 
projects. Title III initially had six authorized uses: search and 
rescue, community service work camps, easement purchases, forest 
related educational opportunities, fire prevention and county planning, 
and community forestry. When the Secure Rural Schools Act was 
reauthorized in 2008, Congress limited the use of Title III funds to 
three authorized uses: activities under the Firewise Communities 
program, reimbursement for emergency services on national forests, and 
preparation of a community wildfire protection plan. As reauthorized, 
Title III now directs each participating county to certify annually 
that Title III funds were used for authorized purposes. For fiscal 
years 2008 through 2012, Title III funds totaled $101 million.
            Additional Revenue Sharing and Payment Programs
    Along with the payments to States under the Secure Rural Schools 
Act, the Forest Service shares 25 percent of net revenues from minerals 
receipts, grazing, and other uses of the national grasslands in the 
payments to counties program under the Bankhead Jones Farm Tenant Act, 
(7 U.S.C. 1010-1012). Payments to counties go to approximately 70 
counties in 17 States, and totaled about $15 million in 2011. There are 
also payments made under special acts including those in Arkansas for 
Smoky Quartz (Public Law 100-446), in Minnesota related to the Boundary 
Waters Canoe Area (16 U.S.C. 577) and in Washington for the Quinault 
Special Management Area (Public Law 100-638.)
    The Forest Service coordinates with the Bureau of Land Management 
which administers additional payments to certain counties in western 
Oregon under the Secure Rural Schools Act. In addition, national 
forests are included in the eligible federal lands for which the 
Department of the Interior administers the Payments in Lieu of Taxes 
(PILT) program.
            Secure Rural Schools Act Successes
    For fiscal years 2008 through 2012, the Secure Rural Schools Act 
through Titles I, II, and III programs provided nearly $2 billion in 
economic support to rural communities. The Forest Service values 
relationships fostered with tribal, county officials and other 
stakeholders under Title II. By 2012, 118 RACs were established across 
the country. By actively engaging community members in recommending 
projects, the Forest Service has seen a significant decrease in appeals 
and a dramatic increase in successful long-term collaborations.
    Each of the 15-member committees represent diverse interests such 
as environmental and conservation groups; watershed associations; 
forest and mineral development; hikers; campers; off-highway vehicle 
users; hunting and fishing enthusiasts; tribal, State and local 
government officials and teachers; and officials from local schools. 
Following the reauthorization for FY 2012, USDA encouraged all RACs to 
recruit new culturally diverse members for the committees. RAC members 
learn about the richness of natural resources on the national forests, 
and share their knowledge of the natural and social environment. 
Members hear one another's views, interests and desires for national 
forest management and come to agreement on projects that will benefit 
the national forests and nearby communities. Here are a few examples 
that illustrate successful projects undertaken with Secure Rural 
Schools funding from 2008 to 2012.
    In Sierra County, California, a partnership with the Sierra County 
Fire Safe & Watershed Council supported by Title II funding has 
resulted in a number of high priority projects to reduce hazardous 
fuels within and adjacent to the communities within Sierra County and 
the National Forest. The fuels reduction projects activities are 
resulting in higher level of effective fuels reduction treatments 
within the Wildland Urban Interface (WUI). In rural Sierra County, the 
partnerships and Title II funds have provided more than $200,000 and 
the financial mechanism for success. An additional benefit of these 
projects has been an increased level of opportunity for local 
employment within the County.
    Since 2008, Apache County, Arizona in partnership with the White 
Mountain Apache Tribe upgraded a main access road to national forest 
lands using Secure Rural School Act funds. These road improvements have 
been critical to the treatment of areas within the Tribal Forest 
Protection Act (TFPA)--Los Burros project and the removal of materials 
under the White Mountain Stewardship Contract. To date, three quarters 
of the treatments are completed. This amounts to 12,000 acres of 
stewardship treatments of which 3,700 are within the TFPA project. The 
public is greatly benefiting from road improvements with safer and more 
comfortable access to quality recreation areas. This project has also 
improved relations with the White Mountain Apache Tribe.
    In northern Utah, the Uinta-Wasatch-Cache National Forest has 
worked cooperatively with local counties to implement an aggressive 
``War on Weeds'' program with Title II funding. These projects are 
vital to successfully treating invasive weed species threatening 
critical sage-grouse habitat, watersheds, and high-value recreation 
areas. Work is being accomplished through Forest Service and county 
crews. Fourteen local youth were hired through the Youth Conservation 
Corps (YCC) program to assist in the implementation of this program.
            Sequestration
    Pursuant to the Balanced Budget and Emergency Deficit Control Act 
of 1985, as amended by the Budget Control Act of 2011 and the American 
Taxpayer Relief Act of 2012, the Secure Rural Schools account is 
subject to sequestration. When payments were made to counties, the 
Forest Service opted to make full payment. The reduction to Forest 
Service's Secure Rural Schools program, Special Authorities, and the 25 
percent fund required by sequestration is $16.7 million or 5.1 percent 
of the amount subject to sequestration. The Forest Service will very 
soon notify States of the impacts. Communities will be informed of 
potential options including repayment or other reductions.
            Conclusion
    The Secure Rural Schools Act has provided more than a decade of 
transitioning payments to eligible States and counties to help fund 
public schools and roads and provided predictably declining payments to 
States to transition to the 25 percent payment. In addition, it has 
also created a forum for community interests to participate 
collaboratively in the selection of natural resource projects on the 
national forests, and assisted in community wildfire protection 
planning.
    Thank you for the opportunity to discuss this program with the 
Committee. The Secure Rural Schools Program has successfully 
strengthened rural economies and developed important collaborative 
working relationships between the Forest Service and partners. The 
Administration supports reauthorization with mandatory funding and 
included a proposal in the FY2013 Budget. The original intent of the 
Secure Rural Schools program was to provide temporary assistance to 
communities as they transition away from timber dependent industries. 
The 2013 Budget provides long-term economic development opportunities 
by doubling funding for economic development and forest restoration 
projects, while ramping down payments to communities over the five year 
authorization period.
    We would be happy to answer any questions you may have.

    The Chairman. Thank you very much, Chief. We'll have some 
questions in a moment.
    Ms. Haze.

  STATEMENT OF PAMELA K. HAZE, DEPUTY ASSISTANT SECRETARY FOR 
BUDGET, FINANCE, PERFORMANCE AND ACQUISITION, DEPARTMENT OF THE 
                            INTERIOR

    Ms. Haze. Good morning.
    The Chairman. There you are.
    Ms. Haze. Good morning, Chairman Wyden, Senator Murkowski 
and committee members. Thank you for allowing me to be here to 
testify on behalf of the Department of the Interior and to talk 
about Secure Rural Schools and the Payment in Lieu of Taxes 
program.
    These 2 programs are good examples of the way in which the 
Federal Government can be a good neighbor to local communities. 
These 2 programs provide funds to counties that help them to 
pay for ongoing community services. In the case of Secure Rural 
Schools, promote enhancement of forest ecosystems and forest 
health, just as Chief Tidwell was explaining.
    The Department of the Interior's lands and programs benefit 
from this relationship because the emergency response, 
transportation and other services provided by counties and 
other jurisdictions help to provide access for people and 
services that are needed to operate and maintain parks, 
forests, refuges and other public lands. We work closely in 
partnership with the Forest Service to administer the Secure 
Rural Schools program.
    In the Department of the Interior Secure Rural School 
payments are made by the Bureau of Land Management. BLM makes 
payments annually to 18 counties in Western Oregon that include 
revested Oregon and California grant lands. Beginning in 1994 
and including the most recent payments, BLM has allocated 1.6 
billion in Secure Rural Schools funding. Most recently payments 
were made to those counties by BLM in February including 
revenues, fees and receipts collected in 2012, a total of 36 
million was distributed to those 18 counties. We expect to 
allocate an additional 2 million later this week or the 
beginning of next week.
    We support reauthorization. If the Secure Rural Schools 
program is not reauthorized payments would return to the 
historical revenue sharing formula and O and C counties would 
receive 50 percent of receipts collected on O and C lands. With 
estimated receipts of 15 to 20 million the payments to the 
counties would be within the range of 7 and a half to $10 
million.
    BLM has made improvements in its administration of the 
Secure Rural Schools program based on the recommendations made 
by GAO. BLM has strengthened its oversight, revamped its Secure 
Schools Act website, hosted frequently asked questions, changed 
its certification form and conducted outreach to the counties.
    The relationship we have with counties throughout the 
Nation is important. We value that relationship including our 
ability to make Payments in Lieu of Taxes. Local jurisdictions 
cannot tax Federal lands. The PILT program issues payments to 
counties to make up for the lost tax revenue. PILT funds 
supplemental and other payments shared with States and counties 
that are generated on Federal lands.
    For example, mineral leasing payments to States are 
expected to be over $2 billion this year. Geothermal revenue 
payments to counties are expected to be $4 million this year. 
Since the PILT program began in 1977, a total of $5.9 billion 
in PILT payments has been allocated to counties.
    In 2012 we made payments to more than 1,900 counties. Last 
June a total of $393 million was distributed to counties 
throughout the Nation. We use a formula that is dictated by the 
law based on acreage, population and considering prior year 
revenue payments. The acreage amounts and population rates are 
adjusted each year for inflation.
    Each year in formulating the payment we work closely with 
Interior Bureaus, the Forest Service and other Federal agencies 
to ensure that we have accurate acreage data on which to base 
the payment. We seek input from States on the amounts of prior 
year revenue payments that are retained by counties. Our data 
is audited annually. We regularly meet with counties to keep 
them informed of changes and provide training as requested. We 
issue and post information about the payments publicly to 
ensure transparency.
    Since the program was authorized in 2008 and funded through 
mandatory appropriations, we have been able to provide the full 
level of entitlement to counties. Prior to 2008 PILT was funded 
through annual appropriations. During the years 1995 through 
2007 when it was funded from appropriations, payment amounts 
ranged from 41 to 77 percent of the entitlement level.
    We make our next payment this coming June. It is subject to 
sequester of 5.1 percent.
    We support reauthorization of this program.
    This concludes my statement. Thank you. I'm here to answer 
questions.
    [The prepared statement of Ms. Haze follows:]

 Prepared Statement of Pamela K. Haze, Deputy Assistant Secretary for 
    Budget, Finance, Performance and Acquisition, Department of the 
                                Interior

    Mr. Chairman, Ranking Member Murkowski, and members of the 
Committee, I am pleased to have the opportunity to testify today on the 
Department of the Interior's Payments in Lieu of Taxes (PILT) Program 
and the Secure Rural Schools (SRS) Program. The Administration supports 
ways that the Federal government can fulfill its role of being a good 
neighbor to local communities, such as through PILT and SRS.
            Secure Rural Schools Act
    The Bureau of Land Management (BLM) manages the Secure Rural 
Schools program in concert with the U.S. Forest Service. BLM 
administers the Community Self-Determination Act payments as amended 
(P.L. 106-393) for nearly 2.4 million acres of BLM-managed public lands 
located in 18 western Oregon counties, known as the ``O&C''. The 
Department of the Interior defers to the U.S. Forest Service in matters 
regarding activities on their lands.
            O&C County Payments
    The Secure Rural Schools Act builds upon the foundation laid in 
1937 with the Revested Oregon and California Railroad and Reconveyed 
Coos Bay Wagon Road Grant Lands Act (the O&C Lands Act). Under the O&C 
Lands Act, the 18 O&C counties receive yearly payments equal to 50 
percent of receipts from timber harvests on public lands in these 
counties.
    Between 1989 and 1993, income to O&C counties from timber harvests 
dropped significantly. Congress enacted ``safety net payments'' to 
stabilize income flow to timber-dependent counties in 1994 (P.L. 103-
66). In 2000, Congress enacted the Secure Rural Schools Act, which 
allowed O&C counties to receive a payment equal to the average of their 
three highest timber receipt years from 1986 through 1999. Under the 
Act, the counties also elect the percentage of the payment to be 
distributed directly to the counties (Title I), and the remaining 
percentage to be allocated between Title II projects (administered by 
the BLM), Title III projects (administered by the counties), or 
returned to the Treasury.
    The payments have been reauthorized three times, most recently 
through 2012 as part of the Moving Ahead for Progress in the 21st 
Century Act (P.L. 112-141). Since the law has now expired, absent 
reauthorization, payments to the 18 counties in western Oregon will 
revert to levels under the O&C Lands Act. The President's 2013 Budget 
proposed to reauthorize the program for five years beginning in 2012 
and continuing through 2016 and modify it over the long term.
    We understand the importance of these funds to the viability of 
western Oregon counties in support of county projects and local 
schools. On February 5, 2013, BLM distributed the majority of the 
Secure Rural Schools payments for 2012, totaling approximately $36 
million. Pursuant to the Balanced Budget and Emergency Deficit Control 
Act of 1985, as amended by the Budget Control Act of 2011 and the 
American Taxpayer Relief Act of 2012, the Secure Rural Schools account 
is subject to sequestration. When payments were made to counties, 
Interior held back 10 percent of the scheduled payments in preparation 
for the possibility of sequestration. The reduction to Interior's 
Secure Rural Schools program required by sequestration is $2.0 million 
or 5.1 percent of the amount subject to sequestration. We are working 
to meet the necessary funds control requirements as quickly as possible 
to allow BLM to issue the balance of payments to the counties as soon 
as we can.
            Payments In Lieu of Taxes (PILT)
    The PILT Act (P.L. 94-565) was passed by Congress in 1976 to 
provide payments to local governments in counties where certain Federal 
lands are located within their boundaries. PILT is based on the concept 
that these local governments incur costs associated with maintaining 
infrastructure on Federal lands within their boundaries but are unable 
to collect taxes on these lands; thus, they need to be compensated for 
these losses in tax revenues. The payments are made to local 
governments in lieu of tax revenues and to supplement other Federal 
land receipts shared with local governments. The Department has 
distributed more than $5.9 billion in PILT payments since these 
payments began in 1977.
    While PILT payments are provided without conditions on their use, 
we know that many counties and other local jurisdictions rely on PILT 
payments for support of critically important services and programs, 
including emergency services such as fire and rescue, housing social 
services, and transportation.
    The annual PILT payments to local governments are computed based on 
the formula that is contained in the law, which considers the number of 
acres of Federal entitlement land within each county or jurisdiction, 
the population, and prior year revenue payments made to the 
jurisdiction.
    Federal entitlement lands include lands within the National Forest 
and National Park Systems, those managed by the Bureau of Land 
Management (BLM), those affected by Corps of Engineers and Bureau of 
Reclamation water resources development projects, and certain other 
Federal lands. The formula for calculating PILT payments considers the 
amount of certain Federal land payments received by the county or local 
jurisdiction in the preceding year. These payments are made from 
Federal revenue generating programs (such as receipts from mineral 
leasing, livestock grazing, and timber harvesting) that the Federal 
Government transfers to the counties using formulas in laws such as the 
Mineral Leasing Act.
    Prior to 2008, the amounts available for PILT payments to local 
governments required an annual appropriation by Congress. In 2007, the 
last year that PILT funding was subject to appropriation, PILT payments 
were $232.1 million, comparable to 64.7 percent of the full authorized 
level for counties.
    The Emergency Economic Stabilization Act of 2008 (Public Law 110-
343) authorized PILT for five years as a mandatory program, under which 
counties have received the full PILT entitlement level, including 
inflationary increases. The most recent payment made to counties in 
June 2012, totaled $393.4 million and was distributed to over 1,900 
local government units (mostly counties) in 49 States, the District of 
Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands.
    The FY 2013 Budget proposed a one-year extension of PILT payments 
for 2013. The program was extended for 2013, as proposed by the 
Administration, in MAP-21, the Transportation Reauthorization Act. As 
stated in the Budget, the Administration looks forward to working with 
Congress to develop a longer-term strategy for providing sustainable 
levels of funding for PILT payments, in light of overall constrained 
budgets and the need for appropriate offsets for new mandatory 
spending. In the meantime, we plan to make the payments for FY 2013 in 
June of this year, consistent with the payment schedule in previous 
years.
    Unless Congress takes action to undo sequestration and restore 
funding before the June payments are made, they will be subject to 
reduction. We are still calculating the full entitlement amounts due to 
counties for this fiscal year; however, based on the Office of 
Management and Budget's Sequestration Report we will reduce the overall 
allocation by $20.3 million.
            Conclusion
    The Administration recognizes that PILT and SRS are important to 
local governments, sometimes comprising a significant portion of their 
operating budgets. The PILT and SRS monies have been used for critical 
functions such as local search and rescue operations, road maintenance, 
law enforcement, schools, and emergency services. These expenditures 
often support the activities of people from around the country who 
visit or recreate on Federal lands.
    As we look forward to reauthorization of the programs, the 
Department will work to continue to ensure efficient and effective 
management of these programs.
    Mr. Chairman, this concludes my prepared statement. I would be 
pleased to answer any questions that you or the other Members may have.

    The Chairman. Thank you very much.
    Ms. Fennell, welcome.

 STATEMENT OF ANNE-MARIE FENNELL, DIRECTOR, NATURAL RESOURCES 
       AND ENVIRONMENT, GOVERNMENT ACCOUNTABILITY OFFICE

    Ms. Fennell. Good morning.
    Chairman Wyden, Ranking Member Murkowski and members of the 
committee, I appreciate the invitation to discuss our work on 
Title III of the Secure Rural School Act. As you know the Act 
was in response to the steep decline in Federal timber sales 
which decreased revenues from the national forest managed by 
the Forest Service and by some lands managed by the Bureau of 
Land Management. Within the Act, Title III authorizes counties 
to use payments for certain purposes related to wild land fire 
and emergency services on Federal land.
    At the request of this Committee we undertook a review of 
the oversight and implementation of the 2008 reauthorization of 
Title III and reported our findings last July.
    My testimony today will describe (1), key findings of our 
2012 report and (2), actions the agencies have taken since our 
report was issued.
    First, in terms of our report:
    Overall, we found shortcomings in the areas of oversight, 
expenditures and administrative requirements. Now to briefly 
address each of these areas.
    In terms of oversight, at the time of our report the Forest 
Service and BLM had not issued regulations under the Act and 
guidance was limited and sometimes unclear. This was concerning 
because the Act does not define key terms. For example, the Act 
authorizes counties to use Title III funds for emergency 
services, but does not specify the types of activities covered 
by this term. Agency guidance at the time did little to clarify 
this language.
    Also agencies had no assurance that they had an accurate 
accounting of the amounts of Title III funding spent and 
unspent by the counties which is important because the Act 
requires that unobligated funds be returned to the U.S. 
Treasury.
    In terms of expenditures, counties we reviewed reported 
using Title III funds in ways that were generally aligned with 
the 3 broad purposes specified in Title III. That is wild land 
fire preparedness, emergency services on Federal lands and wild 
fire protection planning. However, we identified expenditures 
by some counties that may not be consistent with specific 
requirements of the Act. These include funding for activities 
such as clearing vegetation along evacuation routes, updating 
911 systems and buying capital equipment. Some counties we 
reviewed for example, reported using the funds for purchasing 
radios, snowmobiles and trucks for patrols.
    In terms of administrative requirements, counties did not 
consistently follow Title III requirements which include annual 
certification of expenditures and 45 day public notification 
periods. We found that some counties closely followed these 
requirements while others did not. For example, some counties 
did not submit certifications when they spent funds or were 
late in doing so.
    Second, regarding more recent agency actions:
    The Forest Service and BLM issued additional guidance since 
our report that clarified the types of allowable uses of Title 
III funds complete with explicit examples. We believe this 
additional guidance addresses our recommendation.
    Also agencies said that they plan to obtain additional 
information on the extent to which counties have obligated 
their Title III funds.
    We also suggested that if Congress chooses to extend Title 
III it consider clarifying the Act to make explicit which types 
of expenditures are and are not allowable. Given recent agency 
guidance there may be less need for changes to the language of 
the Act itself. Still it will be important to monitor county's 
Title III expenditures in the wake of the additional guidance.
    In conclusion, lack of clarity in what are allowable uses 
of Title III funds left counties, who were already fiscally 
constrained, to make their own interpretations of what is 
allowable and what is not. The new guidance should help 
alleviate shortcomings we found, but it will also be important 
to observe how the guidance gets implemented and what, if any, 
adjustments may be needed going forward.
    Chairman Wyden, Ranking Member Murkowski and members of the 
committee, this completes my prepared statement. I'm happy to 
respond to any questions you may have.
    [The prepared statement of Ms. Fennell follows:]

 Prepared Statement of Anne-Marie Fennell, Director Natural Resources 
           and Environment, Government Accountability Office

PAYMENTS TO COUNTIES.--SHORTCOMINGS IN OVERSIGHT AND IMPLEMENTATION OF 
 KEY PARTS OF THE SECURE RURAL SCHOOLS ACT MAY BE ADDRESSED BY RECENT 
                            AGENCY GUIDANCE

Why GAO Did This Study
    Under the Secure Rural Schools Act, counties with federal lands may 
elect to receive payments to help stabilize revenues lost because of 
declining federal timber sales. Under Title III of the act, counties 
are authorized to use these funds for certain projects related to 
wildland fire and emergency services on federal lands. The act provides 
oversight roles for the Forest Service and BLM, requiring them to 
review counties' certification of their Title III expenditures as the 
agencies determine to be appropriate and to issue regulations to carry 
out the act's purposes. GAO reported to this committee in July 2012 
that the agencies had provided limited oversight of county spending 
under Title III and that, although the projects for which counties 
reported using Title III funds were generally aligned with the broad 
purposes of Title III, county spending did not in all cases appear 
consistent with specific provisions of the act.
    This testimony describes (1) key findings of GAO's July 2012 report 
on oversight and implementation of the act (GAO-12-775) and (2) actions 
the agencies have taken to strengthen oversight of county spending 
since the July 2012 report was issued. The testimony is based primarily 
on GAO's 2012 report and includes selected updates conducted in March 
2013 on actions the agency has taken in response to that report.
    GAO is making no recommendations in this testimony. In July 2012 
GAO recommended that the agencies strengthen their oversight by issuing 
regulations or clear guidance. The agencies concurred, and took action 
to implement this recommendation.

What GAO Found
    In July 2012 GAO reported that the Forest Service and Bureau of 
Land Management (BLM) had taken few actions to oversee county spending 
under Title III of the Secure Rural Schools and Community Self-
Determination Act, and that the guidance they provided was limited and 
in some cases did not appear consistent with the act. GAO also reported 
that some expenditures by selected counties may have been inconsistent 
with the act-which may have resulted in part from the limited guidance 
available from the agencies-and that reviewed counties did not 
consistently follow Title III's administrative requirements. 
Specifically, GAO found the following:

   Neither the Forest Service nor BLM had issued regulations 
        under the act, and the guidance the agencies had issued was 
        limited and sometimes unclear. Forest Service guidance, for 
        example, did little to clarify language in the act, neither 
        defining terms from the act nor specifying which types of 
        expenditures were allowed under the act and which were not. The 
        absence of clear guidance or regulations was of particular 
        concern to GAO because the act itself does not define key 
        terms. For example, the act authorizes counties to use Title 
        III funds for ``emergency services'' but does not specify the 
        types of activities covered by this term. Moreover, the 
        agencies did not have assurance that they had an accurate 
        accounting of the amounts of Title III funding spent and 
        unspent by the counties, which is important because the act 
        requires unobligated funds to be returned to the U.S. Treasury 
        upon the act's expiration.
   The counties GAO reviewed reported using Title III funds for 
        projects that were generally aligned with the three broad 
        purposes of Title III-wildland fire preparedness, emergency 
        services on federal land, and community wildfire protection 
        planning-but GAO identified certain expenditures by some 
        counties that may not be consistent with specific requirements 
        of the act. Such expenditures included funding for activities 
        such as clearing vegetation along evacuation routes, updating 
        9-1-1 systems, and conducting routine law enforcement patrols 
        on federal land. Some counties GAO reviewed reported using 
        funds to purchase equipment, such as radios and GPS equipment, 
        sonar equipment, watercraft, all-terrain vehicles, snowmobiles, 
        and trucks for patrols.
   Counties also did not consistently follow Title III's 
        administrative requirements, which include annual certification 
        of expenditures, 45-day notification periods to the public and 
        others before spending funds, and deadlines for project 
        initiation. For example, some counties did not submit a 
        certification for certain years when they spent funds, some 
        counties submitted their certifications late, and some counties 
        did not consistently follow notification and project initiation 
        requirements.

    Since GAO's report was issued, the Forest Service and BLM have 
provided additional guidance to counties, which clarifies allowable 
uses of Title III funds. In addition, the agencies reported that they 
plan to change their requirements for annual reporting of expenditures 
to obtain additional information regarding the extent to which counties 
have obligated their Title III funds. The additional guidance addresses 
the recommendation in GAO's July 2012 report.
    Chairman Wyden, Ranking Member Murkowski, and Members of the 
Committee
    I am pleased to be here today to discuss our work on the Secure 
Rural Schools and Community Self-Determination Act.\1\ As you know, the 
act was a response to the steep decline in federal timber sales during 
the 1990s, which significantly decreased revenues from national forests 
managed by the Department of Agriculture's Forest Service and from some 
public lands managed by the Department of the Interior's Bureau of Land 
Management (BLM). Counties containing federal lands have historically 
received a percentage of the revenues generated by the sale or use of 
natural resources on these lands, and the act was enacted in part to 
stabilize payments to counties dependent on revenues from federal 
timber sales. The act, which covers all National Forest lands and 
certain BLM lands in western Oregon, was initially enacted in 2000 and 
has been reauthorized several times, most recently for a 1-year 
extension in 2012.\2\ Under the act, each county may continue to 
receive a portion of the revenues generated from the sale or use of 
resources from federal lands or can choose instead to receive annual 
payments based in part on historical revenue payments to the county. 
Title III of the act authorizes counties to use a portion of the 
payments for certain purposes related to wildland fire and emergency 
services on federal lands.
---------------------------------------------------------------------------
    \1\ Pub. L. No. 106-393 (2000), as amended.
    \2\ Pub. L. No. 106-393 (2000) covered the period from fiscal year 
2001 through fiscal year 2006. Pub. L. No. 110-28, Title V, Sec.  5401 
(c) (2007), reauthorized the act for fiscal year 2007. Pub. L. No. 110-
343, Div. C, Title VI, Sec.  601 (2008), reauthorized the act from 
fiscal year 2008 though fiscal year 2011. Pub. L. No. 112-141, Div. F, 
Title I, Sec.  100101 (2012), reauthorized the act through fiscal year 
2012. In this testimony, we refer to the Secure Rural Schools and 
Community Self-Determination Act of 2000 as the Secure Rural Schools 
Act.
---------------------------------------------------------------------------
    In 2011, at the request of this committee, we undertook a review of 
the oversight and implementation of the 2008 reauthorization of Title 
III. We examined the actions the Forest Service and BLM had taken to 
oversee county spending under Title III and the extent to which county 
expenditures were consistent with the provisions of the act. In July 
2012 we reported that the agencies had provided limited oversight of 
county spending under Title III and that, although the projects for 
which counties reported using Title III funds were generally aligned 
with the purposes of Title III, county spending did not in all cases 
appear consistent with the act.\3\ We recommended that the Forest 
Service and BLM strengthen their oversight by issuing regulations or 
clear guidance specifying the types of allowable county uses of Title 
III funds. The agencies concurred with this recommendation and have 
taken action to do so. We also suggested that Congress, if it chooses 
to extend Title III beyond the 1-year reauthorization enacted in 2012, 
consider revising and clarifying the language of Title III to make 
explicit which types of expenditures are and are not allowable under 
the act.
---------------------------------------------------------------------------
    \3\ GAO, Payments to Counties: More Clarity Could Help Ensure 
County Expenditures Are Consistent with Key Parts of the Secure Rural 
Schools Act, GAO 12 775 (Washington, D.C.: July 16, 2012).
---------------------------------------------------------------------------
    My testimony today will describe (1) key findings of our 2012 
report related to oversight and implementation of the act and (2) 
actions the agencies have taken to strengthen oversight of county 
spending since our report was issued. This statement is based on our 
July 2012 report, and includes selected updates conducted in March 2013 
on actions the agencies have taken in response to our report's 
recommendation. To conduct the updates, we reviewed additional guidance 
issued by the agencies and interviewed agency officials. Detailed 
information about scope and methodology can be found in our July 2012 
report. We conducted the performance audit work that supports this 
testimony in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform audits to 
obtain sufficient, appropriate evidence to provide a reasonable basis 
for our findings and conclusions based on our audit objectives. We 
believe that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives.
            Background
    The Secure Rural Schools Act was enacted to help address fiscal 
difficulties confronting rural counties having substantial federal 
lands and a history of federal timber harvesting. The act, as 
reauthorized, comprises three principal titles. Under Title I, counties 
are to use the majority of payments they receive for the same purposes 
for which they used federal receipts, in most cases for the benefit of 
roads and schools. Under Title II, counties may reserve a portion of 
the payments to fund certain land management projects that benefit 
federal lands. Title III authorizes the use of a portion of the 
payments for certain purposes related to wildland fire and emergency 
services on federal lands.\4\ These authorized uses include carrying 
out certain activities to increase the protection of people and 
property from wildland fires under the Firewise Communities program,\5\ 
reimbursing the county for search and rescue and other emergency 
services performed on federal land, and developing community wildfire 
protection plans to help protect homes and neighborhoods. Title III 
requires counties to follow certain administrative requirements, 
including publishing public notices of proposed uses for the payments 
and submitting annual certifications of Title III expenditures to 
either the Forest Service or BLM, as appropriate, stating that any 
Title III funds spent in the previous year went toward authorized uses. 
For fiscal years 2008 through 2011, 358 counties received a total of 
$108 million for Title III projects, and individual counties received 
from about $3,600 to over $2 million in a single fiscal year for such 
projects.\6\
---------------------------------------------------------------------------
    \4\ Counties receiving $100,000 or less in payments may allocate 
all of their payments to uses authorized under Title I. Counties 
receiving more than $100,000 must allocate from 15 to 20 percent of 
their payments to Title II and Title III projects or give the funds 
back to the federal government. Counties choose how to divide this 
percentage among Title II and Title III, although counties receiving 
$350,000 or more in payments may allocate no more than 7 percent of the 
payments to Title III projects.
    \5\ The Firewise Communities program is a nonregulatory program 
administered by the National Fire Protection Association and sponsored 
by the Forest Service, Interior, and state forestry organizations. It 
is designed to involve homeowners, community leaders, planners, 
developers, and others in efforts to protect people, property, and 
natural resources from the risk of wildland fire.
    \6\ Payments under all three titles of the act totaled over $2 
billion for fiscal years 2008 through 2011
---------------------------------------------------------------------------
    The Forest Service and BLM are responsible for carrying out certain 
parts of the Secure Rural Schools Act. Both agencies calculate the 
amounts that counties are to receive each year, and both agencies are 
required by the act to review the counties' certification of Title III 
expenditures as the agencies determine to be appropriate. The act also 
requires the agencies to issue regulations to implement the act, 
although it does not describe what the regulations are to address or 
establish a deadline for issuing them.
            Federal Agencies Had Provided Limited Oversight of County 
                    Spending at the Time of Our Report, and Some County 
                    Expenditures May Have Been Inconsistent with the 
                    Provisions of the Act
    In our July 2012 report, we found that the Forest Service and BLM 
had taken few actions to oversee county spending under Title III of the 
Secure Rural Schools Act and that the guidance they provided was 
limited and, in some cases, did not appear consistent with the act.\7\ 
We also found that some expenditures by selected counties we contacted 
may have been inconsistent with the act-which may have resulted in part 
from the limited guidance available from the agencies-and that counties 
we reviewed did not consistently follow Title III's administrative 
requirements.
---------------------------------------------------------------------------
    \7\  GAO-12-775.
---------------------------------------------------------------------------
            Oversight by Federal Agencies
    In July 2012, we reported that neither the Forest Service nor BLM 
had issued regulations under the act and that the guidance the agencies 
had issued was limited and sometimes unclear. We expressed particular 
concern that the agencies had not developed regulations or clear 
guidance because the act itself does not define key terms. For example, 
the act authorizes counties to use Title III funds for ``search and 
rescue and other emergency services, including firefighting, that are 
performed on federal land'' but does not specify the types of 
activities covered by this phrase.\8\ We concluded that because the 
language of the law leaves certain provisions open to varying 
interpretations, and available guidance from the agencies had done 
little to clarify this language, counties had generally been left to 
make their own interpretations about which types of expenditures are 
allowable under Title III and which are not.
---------------------------------------------------------------------------
    \8\ The legislative history of Title III contains almost no 
information that clarifies the phrase ``emergency services.''
---------------------------------------------------------------------------
    To provide guidance, the Forest Service had developed a brief 
overview of Title III, which generally echoed wording in the act, and a 
``frequently asked questions'' document responding to questions on 
authorized uses of Title III funds. At the time of our report, agency 
officials told us they believed the frequently asked questions document 
provided sufficient clarity for counties to use when considering how to 
spend Title III funds.
    Officials from several counties we contacted, however, told us they 
found these documents to be of little help, and our review of these 
documents found that they did not clearly define terms from the act or 
specify which types of expenditures were allowed under the act and 
which were not. For example, the act authorizes counties to use Title 
III funds for ``search and rescue and other emergency services, 
including firefighting, that are performed on federal land'' but does 
not define the types of activities covered by this phrase. Neither of 
the Forest Service documents defined such activities. In addition, in 
the frequently asked questions document, the Forest Service listed 
eight specific uses of Title III funds-including purchase of capital 
equipment, capital improvements, purchase of land, and training for 
emergency response-and asked, ``Are Title III funds authorized for the 
following uses?'' Instead of answering the question directly, the 
documents stated that for certain uses-such as construction of 
facilities, purchase of real property, and purchase of vehicles and 
other capital equipment-the act does not explicitly authorize these 
uses. It then further stated that reimbursement for certain uses-such 
as the purchase of replacement equipment damaged or destroyed during an 
emergency response or maintenance of vehicles and equipment in 
proportion to their actual use for emergency services performed on 
federal land-may be allowable. We concluded that such statements were 
confusing and unclear.
    Further, our review showed that, in addition to being unclear, the 
Forest Service's frequently asked questions document appeared to be 
inconsistent with certain provisions of the act. For example, the act 
authorizes counties to use Title III funds to carry out activities 
under the Firewise Communities program to educate homeowners about, and 
assist them with, techniques in home siting, construction, and 
landscaping. Forest Service guidance documents, however, defined 
Firewise Communities as an approach that, among other things, 
``emphasizes community responsibility for planning in the design of a 
safe community as well as effective emergency response.'' The documents 
did not emphasize the act's requirement that counties' Firewise 
activities with Title III funds must be limited to providing fire-
related education or assistance to homeowners. Moreover, the frequently 
asked questions document stated that developing emergency 9-1-1 systems 
under Firewise-which is not an activity clearly authorized under the 
act-may also be an authorized use of Title III funds. We raised 
concerns that including emergency response in a definition of Firewise 
and suggesting that developing 9-1-1 systems may be an authorized 
activity under the act could lead some counties to interpret the act as 
allowing expenditures that improve the county's emergency response-a 
use not clearly authorized under the act.
    Our report also raised issues related to counties' certification 
that any Title III funds spent in the previous year went toward uses 
authorized under the act. For example, we found that the Forest Service 
and BLM had jointly developed a process to assist counties in 
certifying their Title III expenditures but that the information the 
agencies directed the counties to submit-typically the amount spent in 
each of the three allowable Title III spending categories but without 
further details regarding actual activities-did not allow either agency 
to determine whether counties spent their Title III funds 
appropriately. In addition, the act requires counties to submit 
certifications only for the years they have spent funds, and we found 
that neither the Forest Service nor BLM had a process to contact 
counties that did not submit a certification to determine if these 
counties spent no Title III funds that year or had simply not submitted 
the required certification. Some county officials we interviewed said 
they had not submitted certifications even when their counties had 
Title III expenditures the previous year. Overall, we found that of the 
$108 million in Title III payments provided to 358 counties for fiscal 
years 2008 through 2011, the counties had certified having spent about 
$46 million-or less than half the total amount-by the end of calendar 
year 2011. However, because the agencies did not have a process to 
ensure an accurate accounting of the amounts of Title III funds spent 
and unspent, we concluded that it was unclear whether the amounts were 
accurate and that it would be difficult to ensure that counties return 
to the U.S. Treasury any funds that remain unobligated upon the act's 
expiration, as the act requires.
            Consistency of County Expenditures
    We also found that expenditures by counties we contacted for our 
2012 report did not in all cases appear consistent with the act.\9\ 
These counties reported using Title III funds for projects that were 
generally aligned with the three broad purposes of Title III-wildland 
fire preparedness, emergency services on federal land, and community 
wildfire protection planning- and some counties reported expenditures 
that were clearly authorized by the act. Nevertheless, we identified 
various expenditures by some counties that may not have been consistent 
with specific requirements of the act, such as the following examples:
---------------------------------------------------------------------------
    \9\ For our 2012 review, to obtain information about the projects 
and activities on which counties spent Title III funds, and their 
administrative practices related to Title III, we interviewed, in 
person or by telephone, officials from 42 selected counties of the 358 
counties receiving Title III funds since the act was reauthorized in 
2008. These 42 counties make up a nonprobability sample of counties 
selected for variation in both the amounts of Title III funds received 
and in geographic location. Because the 42 counties we selected are a 
nonprobability sample, the information we obtained from these counties 
cannot be generalized beyond these counties; the information did, 
however, provide us with an understanding of how the selected counties 
spent Title III funds and the actions taken to follow Title III's 
administrative requirements.

   Wildland fire preparedness.--Title III authorizes counties 
        to spend funds for activities carried out under the Firewise 
        Communities program but specifies that these activities are to 
        involve educating or assisting homeowners with home siting, 
        home construction, or home landscaping to help protect people 
        and property from wildfires. Some counties we reviewed used 
        Title III funds on broad emergency preparedness activities that 
        may not be consistent with the 2008 act. For example, two 
        counties we reviewed told us they spent part of their Title III 
        funds to clear vegetation along roads, some of which are 
        potential emergency evacuation routes, and others said they 
        removed vegetation from county lands, parks, schools, or 
        cemeteries or from larger swaths of land to create fuel breaks-
        locations not directly associated with home siting, home 
        construction, or home landscaping. In addition, four counties 
        used Title III funds to update their 9-1-1 telephone systems, 
        according to county officials-an activity not clearly 
        authorized by Title III (although, as noted, agency guidance 
---------------------------------------------------------------------------
        stated that such an activity may be allowable).

   Emergency services on federal land.--Title III authorizes 
        counties to use funds as reimbursement for search and rescue 
        and other emergency services, including firefighting, that they 
        perform on federal lands. Some counties we reviewed spent Title 
        III funds on activities that may not have been consistent with 
        this requirement. For example, instead of reimbursements for 
        specific incidents, a number of counties used Title III funds 
        to pay a portion of their fire or emergency services 
        departments' salary and administrative costs, including office 
        supplies, utility costs, or insurance. As justification for 
        this approach, these counties cited the high percentage of 
        federal land in their counties or the difficulty in breaking 
        out the costs of emergency services on federal versus 
        nonfederal land. Some counties we reviewed also used the funds 
        to carry out routine law enforcement patrols on federal land; 
        officials from one of these counties told us that these patrols 
        help reduce and deter criminal activity and enhance visitor 
        safety on federal lands. In addition, some counties reported 
        that, to maintain access to federal lands, they used Title III 
        funds to help rebuild flood-damaged roads, and some reported 
        using funds to purchase equipment, such as radios and GPS 
        equipment, sonar equipment, watercraft, all-terrain vehicles, 
        snowmobiles, and trucks for patrols.
   Community wildfire protection planning.--The act authorizes 
        counties to use Title III funds ``to develop community wildfire 
        protection plans in coordination with the appropriate Secretary 
        concerned.'' Some counties we reviewed reported Title III 
        expenditures for wildfire protection planning activities that 
        may not be consistent with this provision. For example, one 
        county used Title III funds to purchase vehicles having 
        firefighting capabilities, as well as other equipment 
        associated with emergency response. Another county used Title 
        III funds to contract for firefighter dispatch and suppression 
        services. Officials from this county explained that county 
        emergency service units cannot reach certain remote areas 
        quickly, so they contract with a state agency to provide 
        dispatch and suppression services during the heavy wildland 
        fire season, and because the area served is largely federal 
        land, the county pays for a portion of the contract costs with 
        Title III funds.
            Administrative Requirements
    We also found that counties we reviewed did not consistently follow 
Title III's administrative requirements. Title III requires counties to 
certify expenditures to the Forest Service or BLM annually and provide 
45-day notification to the public and any applicable resource advisory 
committee before spending funds.\10\ The 2008 act also required 
projects to be initiated by September 30, 2011. Our review identified 
instances where counties did not follow the requirements, including:
---------------------------------------------------------------------------
    \10\ Resource advisory committees are established primarily under 
Title II of the act and are to contain 15 members representing diverse 
local interests. For more information on these committees and Title II 
in general, see GAO, Update on the Status of the Merchantable Timber 
Contracting Pilot Program, GAO 10 379R (Washington, D.C.: Mar. 4, 
2010).

   Certification.--Some counties did not submit certifications 
        at all or submitted their certifications late, some certified 
        expenditures for multiple years simultaneously, and some 
        acknowledged putting incorrect information on the certification 
        form. We found various reasons for counties' not complying with 
        the certification requirements in the act. Three counties, 
        according to county officials we interviewed, did not submit 
        their certifications to the Forest Service for the years they 
        spent funds because they were unaware of the requirement to do 
        so. Two other counties submitted certification forms for some 
        but not all years in which they spent funds, and many counties 
        submitted their certification forms after the deadline 
        specified in the act, in some cases because they were initially 
        unaware of or overlooked the requirement to do so.
   Public notification.--The act directs each county, before 
        moving forward with Title III projects, to publish a proposal 
        describing its planned use of Title III funds in local 
        newspapers or other publications, after which the county must 
        allow a 45-day comment period before using the funds. Some 
        counties in our review followed only part of the public 
        notification requirement. For example, some counties published 
        notices in their local newspapers but did not allow for a 45-
        day comment period before moving ahead with projects or 
        activities, according to county officials and documents, while 
        other counties issued public notices in some years but not in 
        others. We also found four counties that did not issue any 
        public notices on their Title III project proposals; officials 
        from these counties told us that they were unaware of the 
        requirement to do so.
   Notice to resource advisory committees.--Some counties in 
        our review did not notify the relevant resource advisory 
        committees of their Title III projects, as required under the 
        act. County officials cited a number of reasons for the lack of 
        notification, including (1) they were unaware of the 
        requirement to do so; (2) the committee meets only once a year 
        in the summer, which does not coincide with the county's 
        timeline for the Title III budgeting process; and (3) the 
        county planned to notify the resource advisory committee but 
        did not because a local Forest Service official stated that 
        resource advisory committees were involved only in Title II, 
        not Title III projects-even with a specific reference to such 
        committees in Title III of the act.
   Project initiation.--Some counties did not initiate projects 
        by September 30, 2011, as required by the 2008 act.\11\ County 
        officials we interviewed provided a number of reasons why they 
        missed this deadline. For example, counties did not receive 
        their Title III funds for fiscal year 2011 until 2012, and 
        officials in one county told us that their county's guidelines 
        prohibit starting projects before funding is actually received. 
        Another county had not initiated all of its Title III projects 
        because some of its previous projects had cost less than 
        estimated, unexpectedly leaving the county more Title III funds 
        to spend; county officials told us that they were selecting 
        additional Title III projects on which to use the extra 
        funding.
---------------------------------------------------------------------------
    \11\ The 2012 reauthorization of the act extended the deadline for 
initiating such projects to September 30, 2012.

    The 2008 act also required Title III funds to be obligated by 
September 30, 2012, and officials from nearly all counties in our 
review that had spent funds told us they anticipated doing so.\12\ 
However, as noted, the agencies did not have a process to ensure an 
accurate accounting of the amount of Title III funds spent and unspent, 
making it difficult to ensure that unobligated funds are returned to 
the U.S. Treasury when the act expires.
---------------------------------------------------------------------------
    \12\ The 2012 reauthorization of the act extended the deadline for 
funds to be obligated to September 30, 2013.
---------------------------------------------------------------------------
            The Forest Service and BLM Have Taken Action to Strengthen 
                    Oversight
    In response to our recommendation that the agencies strengthen 
their oversight by issuing regulations or clear guidance specifying the 
types of allowable county uses of Title III funds, the Forest Service 
and BLM provided additional guidance to counties, which clarifies the 
types of allowable uses of county funds. In addition, the agencies 
reported that they plan to update their expenditure reporting 
requirements for Title III funds, so that counties report not only 
funds expended the previous year but also amounts remaining 
unobligated.
    Regarding guidance, soon after our report was issued in July 
2012\13\, the agencies updated their websites to provide substantial 
additional information on allowable expenditures under the act. Given 
that this information includes specific discussion about, and numerous 
examples of, expenditures that are and are not authorized by the act, 
we believe that this additional guidance addresses our recommendation. 
The guidance addressed each of the three main areas of allowable 
spending under Title III, as follows:
---------------------------------------------------------------------------
    \13\ GAO-12-775.

   Wildland fire preparedness.--As we noted, several counties 
        reported expending funds for broad emergency preparedness 
        activities under the Firewise Communities program that did not 
        appear consistent with the act because they did not involve 
        providing fire-related education or assistance to homeowners. 
        This issue is specifically addressed in the guidance, which now 
        states that Title III authorizes funds to be ``spent on 
        Firewise Communities program activities that (1) educate 
        homeowners in fire-sensitive ecosystems about techniques in 
        siting (positioning or locating) a home, constructing a home, 
        landscaping and maintenance around a home . . . .or (2) assist 
        homeowners in implementing these techniques'' (emphasis in 
        original). The guidance goes on to list examples of activities 
        that are authorized-such as disseminating Firewise information 
        or assisting with ``clean-up days''-and those that are not-such 
        as updating 9-1-1 systems or clearing vegetation along 
        emergency evacuation routes or from county lands, parks, 
        schools, cemeteries, or other larger swaths of land not 
        directly associated with home siting.
   Emergency services on federal land.--Likewise, the guidance 
        addresses concerns we raised about whether certain projects 
        related to emergency services on federal land were clearly 
        consistent with the act. The guidance, among other things, 
        clarifies the definition of emergency services and provides 
        lists of expenses that are authorized (e.g., salary or wages of 
        emergency response personnel deployed during an emergency 
        response) and those that are not (e.g., routine sheriff's 
        patrols of national forest roads and campgrounds, cleanup after 
        a flood event, and purchase of capital equipment or real 
        property).
   Community wildfire protection planning.--The guidance also 
        addresses concerns we raised about development of community 
        wildfire protection plans by clarifying authorized uses and 
        illustrating those that are not authorized, including the 
        implementation of activities described in such plans.

    Regarding annual reporting requirements on the part of counties, 
both agencies updated the certification form for counties to use in 
certifying Title III expenditures, so that counties must report not 
only on the funds expended the previous year but also on the amount of 
their Title III funds that remain unobligated. Such an update is 
consistent with guidance provided by Agriculture's Office of General 
Counsel in response to a Forest Service request for legal advice on its 
role in counties' return of unobligated Title III funds. The update is 
likely to allow the agencies a more accurate accounting of the overall 
amounts of Title III funds spent and unspent-a need we noted in our 
report.
    In our July 2012 report, we also suggested that if Congress chooses 
to extend Title III beyond the 1-year reauthorization enacted in 2012, 
it should consider revising and clarifying the language of Title III to 
make explicit which types of expenditures are and are not allowable 
under the act. Given that the agencies have issued guidance that we 
believe clarifies the allowable uses of Title III funds, there may be 
less need for changes to the language of the act itself. Nevertheless, 
it will be important to monitor counties' Title III expenditures to 
observe whether the incidence of expenditures that appear inconsistent 
with the act diminishes in the wake of the additional guidance the 
agencies have issued.
    Chairman Wyden, Ranking Member Murkowski, and Members of the 
Committee, this completes my prepared statement. I would be pleased to 
respond to any questions that you may have at this time.

    The Chairman. Ms. Fennell, thank you.
    Before we go to questions, colleagues, we've received a 
letter from Senator Michael Bennet of Colorado commending the 
committee for holding today's hearings on Secure Rural Schools 
and PILT. Without objection, we will make Senator Bennet's 
letter a part of the record.
    The Chairman. Let me begin, if I might, with a question or 
2 for you, Chief Tidwell, and you, Ms. Haze.
    Our rural communities are really hurting. You know, they 
are watching all the bickering going on in Washington, DC. What 
I find when I have town hall meetings around our State in every 
county, every year, people just say, who is going to do 
something back in DC to change things and put in place some 
policies so that the rural economy can get going again?
    That's what this is all about in just, kind of, breaking it 
down in sort of simple, understandable English. So what the 
committee has essentially been looking at is this idea of a 
dual track kind of strategy.
    On one hand, both short-term and long-term we would be 
trying to get the timber harvest up. We think we can do that, 
particularly Chief, with collaborative approaches like you have 
stressed today. Do it consistent with our environmental laws.
    Then we've also said we're going to have to try some fresh 
approaches which is what we're trying to look at with revenue 
sharing, bringing together communities where there's Federal 
land and Federal water. It's why we're saying we've got to have 
Secure Rural Schools for essentially some period of time in 
order to start looking at these broader approaches.
    So my question to you, Chief, and Ms. Haze, first of all is 
what can be done now, this point, this year, quickly to take 
steps to boost the timber harvest and do it in line with 
environmental laws? Chief, I think you've given us some ideas 
with your approach for collaborative kinds of efforts because 
clearly a healthy forest will help equal a healthy economy.
    But what can be done short term so these communities can 
get moving again and see some real progress?
    Mr. Tidwell. Mr. Chairman, you know, last year we came out 
with our accelerated restoration strategy that identified the 
65 to 83 million acres that we need to do restoration on. Along 
with that we made the commitment to increase the amount of 
acres that we treated along with the outputs. The key output, 
of course, is saw timber, to increase that 20 percent over the 
next couple years.
    We made our target this last year. We are focused to do 
everything we can to be able to stay on that because we 
recognize the need of restoring these lands. Out of the 65 to 
83 million acres there's over 12 million acres that we have no 
choice but to use some form of timber harvest to be able to 
restore those lands. That's what we want to continue to focus 
on, to be able to make sure we can sustain the infrastructure, 
but at the same time to be able to get more of this work done.
    So we are continuing to stay focused on that. Your support 
for these collaborative efforts, and I can use your State as a 
perfect example, of where people are coming together today and 
finding ways to be able to reach agreement and move forward. 
There's a greater understanding about the need to restore these 
lands before we lose forest to whether it's fire, insect and 
disease or ongoing drought, wind storms, whatever. Those are 
the things that are really resonating with rural economies, 
rural America today.
    The Chairman. Chief, when you say restoration work 
particularly in these areas susceptible to insects and disease, 
what you just said in response to my first question is that it 
really means, in many respects, increasing the timber harvest. 
Is that correct?
    Mr. Tidwell. It is. Especially on that 12 and a half 
million acres that we believe we don't have any other tool that 
we can use.
    The Chairman. Good.
    Chief, I want to let my colleagues ask some questions so 
I'll get into more on a second round. But I just want to again 
appreciate your leadership, particularly on the East side of 
Oregon even before our bill has been enacted. We're seeing 
progress in terms of litigation going down and the cut going 
up. So I thank you for it.
    I do want to ask you, Ms. Haze, the same question because, 
as you know, the Chief with the Forest Service is talking about 
the East side where we've made some progress. But on the West 
side, the Bureau of Land Management manages the O and C lands. 
These communities also feel like they've just been flattened. 
So we've got to get the cut up. We've got to get the harvest up 
both short term and long term.
    What steps can you take, starting now, to do that?
    Ms. Haze. So Secretary Salazar has talked about a 
commitment to restore healthy habitat and provide sustainable 
timber harvest.
    BLM initiated their 3 collaborative pilot projects in 
Roseburg, Medford and Coos Bay. Those are underway and working 
with and with the input of Drs. Norm Johnson and Jerry Franklin 
to look at sustainable, collaborative projects. BLM is in the 
process of implementing 7 more.
    So I think that in combination with the reauthorization of 
Secure Rural Schools are the short term needs.
    The Chairman. So what can be done now to increase the 
harvest? I understand the plans that have been laid out in the 
past. I think you know from my conversations with the agency, 
so many of these communities say that the agency isn't hitting 
the targets.
    So what can be done to increase the harvest now?
    Ms. Haze. So my understanding is that BLM is planning to 
work toward their target this year. I think we have some 
evaluating to do based on the sequester that is impacting all 
of our programs. I don't think we have a final answer for the 
impacts of that yet.
    The Chairman. Can you get me an answer to that question?
    Ms. Haze. Yes.
    The Chairman. Because in those hard-hit communities, in 
Josephine County, in Coos, and places like Cottage Grove, you 
know, rural counties. if they hear the words that you talked 
about, planning to hit the target, evaluating the effort-these 
communities that have been hit so hard, that's not going to 
address their concerns. They want to hear specifics.
    Can you get me an answer, say within the next 10 days, 
specifically on what will be done on this point to increase the 
harvest?
    Ms. Haze. Yes, Chairman.
    The Chairman. OK. Thank you.
    The Chairman. Senator Murkowski.
    Senator Murkowski. Thank you, Mr. Chairman.
    I'll continue on what we're going to do to increase the 
harvest. You know, even in the areas where we have agreed as to 
what the plan may be, we're not seeing that, we're not seeing 
the production there. In the Tongass the current land 
management plan calls for cutting of 267 million board feet a 
year yet we're barely getting 15, 1, 5, million board feet per 
year.
    So, you know, the frustration, of course, is huge. We have 
had many opportunities to discuss just this about well, OK, 
we've agreed that this is where we should be with the harvest. 
We're not even--it's not only we're not in the ball park. We're 
not even in the same town here when we're talking about what 
we're putting up for sale or what our goal is and what we are 
achieving.
    Now Ms. Haze, you indicate that because of sequester we're 
going to be seeing even less. As a member of the Appropriations 
Committee we got a letter from the Department of Ag saying that 
due to sequestration the amount of Forest Service timber volume 
offered would be and this is offered nationwide, would be 
reduced by approximately 15 percent. The sequester is 5 
percent. Not quite sure why we're seeing a reduction in the 
board feet of 15 percent.
    Again, when you're a community that is looking for an 
answer here even before sequester we weren't even close to 
getting where we needed to be in terms of the timber harvest. 
Now it would appear that we've got, I don't know, an excuse to 
do even less. What's our problem here? Why can't we even begin 
to start achieving what we have agreed to in places like the 
Tongass?
    I recognize we're talking a lot about restoration here 
which is important. But we have to recognize that in the 
Tongass it's not an issue of thinning because we have disease. 
We need to be working on our timber sales.
    I'm going to give you a chance to answer that Chief 
Tidwell. But I want you to also respond in context with the 
Governor of Alaska's recent move toward increased timber 
production within the State. He's appointed a State Timber Task 
Force to come up with some ideas.
    One of the recommendations is to create a 2 million acre 
State forest out of our national forest system lands. Would 
something like this help us, a smaller pilot project to test 
the effectiveness of State timber management? We're just not 
seeing it at the Federal level. We've got to do something.
    So can you speak to not only the idea of the State's 
proposal, but how we can do better to keep the agreements that 
have already been made?
    Mr. Tidwell. Senator, I know that we need to deliver 
because we've talked about the opportunity to transition to 
second growth harvest there in Southeast Alaska. A key part of 
that is for us to be able to deliver each year on our targets 
to be able to provide that bridge of material from the old 
growth harvest until we can move to the second growth.
    Last year when I was at a hearing with you I told you we 
were going to sell 80 million board feet from the Tongass. We 
didn't make that target. We sold about 53, 54 million this 
year.
    This coming year the forest is telling me that they are on 
target to sell 100 million. They've got to get a difficult 
decision out. But that's the focus that we're on to be able to 
demonstrate that we can deliver on our part to be able to move 
forward with this transition strategy.
    Senator Murkowski. Even though the Tongass management plan 
calls for 267 million board feet. So what we're saying is, is 
that we're delivering a little bit more, but we're not even 
half way to what the Tongass management plan calls for.
    Mr. Tidwell. The Tongass forest plan, that's an allowable 
harvest level. It's not a target. That term that we used in the 
planning it's, I think, in times has been misleading. But all 
that does is it indicates what is allowable, what's the 
capability within our suitable timber lands to be able to 
produce at a sustainable basis.
    Our targets are driven by really what our budgets are and 
what we feel we can get accomplished every year. So when I talk 
about the 80 million last year, the 100 million this year, it's 
based on what we feel we can actually get prepared. Actually it 
will also sell.
    In the past we used to just--we put up a lot of sales. We'd 
offer a lot of sales. Our target used to be based on what we'd 
offer. But we changed that a few years because we wanted to get 
the work done. So our target now is just for what we actually 
sell, not just what we offer.
    Senator Murkowski. So, Chief, given the budget constraints 
that we are dealing with, what do you think of the State's 
proposal to allow for State management of State forest?
    Mr. Tidwell. You know, this issue has come up in the past. 
I think it's--we have different mandates. We have different 
laws that represent what the public wants from their national 
forests. That's what governs the management of our national 
forests. It's based on the public involvement in our planning 
process.
    Senator Murkowski. But the public also needs some jobs or 
they can't live there.
    Mr. Tidwell. They do need the jobs. That's why we're 
focused on moving forward with our transition plan to be able 
to move to second growth that I believe will be able to produce 
more jobs than what we have in the past.
    Senator Murkowski. Chief, you and I have both acknowledged 
that in order to get to that second growth we can't just snap 
our fingers. We can't make those trees grow any faster. In the 
meantime you've got an industry that is dying out. The trees 
might be able to transition but the people, the families, the 
economic opportunities that were there, won't be able to hold 
on.
    So I think we recognize that things don't measure up as 
neatly in real life as they might on paper. So we've got a lot 
more work to be doing together.
    My time has expired. But we'll continue this questioning. 
Thank you.
    The Chairman. Thank you, Senator Murkowski.
    Senator Landrieu.
    Senator Landrieu. Thank you.
    Mr. Chairman, I am so looking forward to helping us figure 
this out because I think if we can it will be a tremendous help 
to our entire country and to the people that live in the 
communities that Senator Murkowski and Senator Wyden were just 
referring to and a real benefit to our environment as well.
    Let me ask this question to Chief Tidwell and Ms. Haze. Do 
you all have a total amount of money that comes into the 
Federal Government from all of these sources that we've talked 
about, harvesting, grazing, geothermal, etcetera, etcetera, 
etcetera, from Agriculture and Interior? Can you give me a 
rough estimate of what that dollar amount is every year?
    If you can't I really do need somebody to submit that to 
the committee by close of business today because you should 
have it.
    How do----
    Ms. Haze. Senator Landrieu, for the Department of the 
Interior I can tell you we collect approximately $13 billion a 
year in revenues, fees, receipts.
    Senator Landrieu. From onshore and offshore?
    Ms. Haze. Onshore, offshore, grazing, aeration.
    Senator Landrieu. Offshore, everything.
    How about Agriculture?
    Ms. Haze. Agriculture is in there.
    Senator Landrieu. So it's about $13 billion.
    Ms. Haze. Thirteen billion.
    Senator Landrieu. So this issue really is about looking at 
that 13 billion and figuring out a way to better allocate it 
for the communities that actually produce it, that produce 
that, to share, in a way, that helps them to achieve some of 
the objectives that the chairman and the ranking member and 
some of us have in mind. So, we're working off of a $13 billion 
income? Is that it?
    Ms. Haze. That's right.
    Senator Landrieu. OK.
    Let me ask how much of that money comes from onshore and 
how much does come from offshore?
    Ms. Haze. That's a good question. I should know that.
    Senator Landrieu. I think it's--what is it? It's 6.3 from 
offshore and so it's about equal. It's a little bit more from 
onshore. 6.3 from offshore.
    Those offshore revenues come from what States, off the 
coast of what States?
    Ms. Haze. Louisiana.
    Senator Landrieu. That's good. What else?
    [Laughter.]
    Senator Landrieu. What other States?
    Ms. Haze. Mississippi? Florida?
    Senator Landrieu. Nope, not Florida, Alabama.
    Ms. Haze. Alabama. You know better than I do.
    Senator Landrieu. Mississippi, Louisiana, Alabama, a little 
bit of California and Texas, slightly a little bit in 
California.
    So 4 States are producing 6.3 billion and then all the rest 
of the States, including a little bit from Louisiana, I think, 
although we only have 2.5 percent of our land is Federal, 
completely different than the West which I understand their 
dilemmas. But the rest of that comes from, you know, onshore 
production.
    Now, Mr. Tidwell, let me ask you this. I was very 
encouraged that you said that the Administration is interested 
in a revenue sharing program for interior States to help them. 
But I didn't hear you mention anything about coastal States. Do 
you want to elaborate?
    Mr. Tidwell. My remarks were about all the States where we 
have national forest system lands. So it's 41 States across the 
country. So and it's a Secure Rural School. It's 729 counties 
that we share that.
    Senator Landrieu. Yes, but what about the coastal States 
that are producing the 6.3 billion that comes into the Federal 
Treasury. I think we've been doing that since when? 1923?
    Mr. Tidwell. That is shared. That's through the Department 
of Interior's programs that they administer is where that 
sharing occurs.
    Senator Landrieu. OK. Ms. Haze, let's talk to you about 
that?
    Since 1923 we've produced, you know, literally billions and 
billions and billions of dollars. Are you aware of what's 
happening along the Gulf Coast with the erosion that is going 
on that's the greatest erosion on the North American continent? 
Are you at all aware?
    I know that you focus on the interior of the country, but 
the exterior is in really, tremendous, stress and strain 
whether it's Louisiana or Massachusetts or New Jersey?
    Ms. Haze. So, it's fair to say I focus on the financial 
aspects of the Department. I did actually once visit the 
wetlands land down in Lafayette, Louisiana and learned a great 
deal about the erosion along the coast there.
    Senator Landrieu. It's pretty bleak. I mean, we're losing a 
football field every 30 minutes. It's the largest erosion 
underway on the whole continent including, you know, Mexico, 
Canada and the United States. We're having a little difficultly 
with the Administration, kind of, even recognizing that it's 
happening.
    So you might want to take this message back and let them 
know that I'm looking forward to working to find a way forward 
for PILT and for Rural Schools and fire. But you know, we also 
have some coastal issues that need to be dealt with as well 
with the resources that we help to provide for the country.
    Thank you.
    The Chairman. Thank you, Senator Landrieu.
    Just before we go to our next Senator, Senator Risch, on 
the point that you're making and I think it's a very good one 
about finding, you know, common cause. I did have a chance to 
talk to Secretary Vilsack recently. Of course, the Department 
of Ag is your Agriculture and the Forest Service intertwined. 
He is very interested in exploring with us this whole revenue 
sharing concept and trying to find common cause between the 
communities where there's Federal land and Federal water. So I 
think we've got some good conversations just beginning.
    Alright, let's see. Senator Risch has departed.
    Senator Barrasso.
    Senator Barrasso. Thank you very much, Mr. Chairman.
    The Secure Rural Schools and Payment in Lieu of Taxes or 
PILT programs are distinctly different programs. They are 
separate topics but they have equally divergent histories and 
stated purposes. I support the PILT program.
    The PILT program provides Federal money to county and local 
governments to make up for or in lieu of property taxes that 
can't be levied on Federal property. PILT payments are simply 
the U.S. Government acting as a responsible land owner to help 
support essential local government services such as schools and 
roads. As in the case with all land owners if the existing 
owner is unwilling or can't pay the property taxes then new 
owners are needed.
    The purpose of the Secure Rural Schools program is 
different. That was best summarized, I believe, on the Senate 
Floor last year by Senator Merkley when he said, ``It is a 
commitment our Federal Government made to rural forest counties 
when it determined,'' that's the Federal Government, when the 
government, ``determined that it would put environmental 
overlays over large blocks of forest land that were dedicated 
to timber production with revenue then shared with local 
counties.'' I agree with Senator Merkley.
    I agree with him that the purpose of the program is to 
assist communities impacted by the overlay of Federal 
environmental policies. These policies have destroyed rural 
communities all across the West. They have forever altered the 
life of small towns and counties, especially and to me, has 
been not for the better.
    They have taken away the economic ability of communities to 
survive and to thrive on their own which would be without 
Federal Government assistance. As the environmental overlays 
were put into place, jobs that supported families and 
communities for generations have been lost. The listing of the 
northern spotted owl, President Clinton's road less rule and a 
whole host of Federal regulations and actions set in motion the 
decline and elimination of thriving communities all across the 
West.
    In 1991, 38 Oregon and Washington counties began receiving 
owl guarantee payments as a temporary safety net to soften the 
blow to their timber based economy. Prior to the need for owl 
payments counties were funded by receiving 25 percent of the 
Forest Service's timber sale receipts. They were compensated 
and rightfully so to help provide services to the tens of 
thousands of people and their families who relied on timbering 
for their jobs.
    These were thriving communities with an economic base that 
created a strong middle class. In the year 2000 when the Secure 
Rural Schools act became a law owl guarantee payments were 
extended to 721 counties nationwide. The program was only 
supposed to be temporary to expire in the year 2006.
    However, the environmental overlay of regulations and other 
policies of the Federal Government didn't go away. Communities 
continued to struggle to survive against the economic barriers 
created by Federal policies. Extension and reauthorizations 
have occurred in 2007, 2008 and 2012.
    Now, I understand why Senator Wyden and others have worked 
so hard to continue funding the program. The Federal Government 
essentially took away the livelihoods and funding for families 
in counties by blanketing the region with environmental 
overlays. Regrettably, the same government that imposed the 
overlays is now$16 trillion in debt and funding existing 
programs often comes at the expense of others.
    I have a poster behind me. This poster shows that last 
year's transportation bill included 1 year extension of PILT 
and SRS. The 1-year extension was paid for through tax 
provisions and by using 10 years of funding from the abandoned 
mine land program that was designated for the State of Wyoming. 
It is the classic robbing Peter to pay Paul scenario.
    It's not sustainable. It did not solve the problem.
    The solution is not to make communities dependent on 
Federal payments which is the path we're currently on. Rather 
the solution is to remove the environmental overlays that 
Senator Merkley referenced in his floor speech. I believe this 
can be done in a way that provides both economic growth and 
environmental stewardship.
    Rural counties are clamoring for a hand up, not a hand out. 
We need more active management to foster healthy, vibrant 
forests. The Vancouver Sun reported March 1st, ``There's no way 
North American's stud lumber sawmills will be able to keep up 
with the recovering U.S. housing market.'' European sawmills 
will likely make inroads into North America.
    Rural counties that were once robust can become so again. 
So I'm encouraged by statements I'm hearing and comments made 
over the last few months by Members of Congress and Governors 
from both parties. The future of counties should not be 
dependent on the uncertainty of the Federal Government budget.
    It's time to empower rural communities to create their own 
financial stability. With national deficits soaring, bark 
beetle infestation and excessive fuel loads feeding 
catastrophic fires, we can no longer afford environmentally or 
economically to passively manage our forests and for rural 
counties to depend on the Federal dollar.
    So my question, Mr. Chairman, as my time is expired, is are 
there specific actions that the Forest Service and BLM are 
going to take to limit the impact of environmental overlays and 
go ahead and actually increase timber production and revenue 
for the counties involved?
    You can answer.
    The Chairman. I think you ought to be in a position to 
respond to the Senator's question. So, go ahead, Chief.
    Mr. Tidwell. Senator, in my earlier remarks I talked about 
the effort we have to increase the amount of tree limits 
occurring which is resolving an increase in harvest.
    You know, I've spent a majority of my career dealing with 
the conflict and the controversy around public land management, 
35, now 36 years in the Forest Service. What I'm seeing today 
is how groups are coming together. Diverse interests are coming 
together and agreeing about the type of work that needs to 
happen on the landscape.
    We are seeing a significant change in the amount of work 
that we're getting done. I think the more that we can embrace 
these collaborative efforts, to support those efforts or bring 
people together because there's more and more of a recognition 
of the things that you've pointed out of the need for us to do 
more treatment, to do more timber harvest to reduce the fuels, 
to reduce the insect and disease outbreaks. Because of that, 
that's why we were able to, I felt confident, that I could put 
the Agency's reputation out there to say that we would be 
increasing harvest over the next few years and with a flat 
budget with no expectation that we'd see an increase.
    But because--but the reason for that is because it is 
collaborative efforts. The other thing is that we've recognized 
that we need to do analysis for much larger areas. We used to 
spend a lot of time doing projects for 500 acres, maybe 1,000 
acres.
    Today we recognize we need to be doing analysis on tens of 
thousands of acres at one time. This has been a reach for us. 
But I'll tell you we've have success. Up in South Dakota last 
year they did one EIS for 248,000 acres that they'll be able to 
get in there for the 7 years and do whatever treatment they 
need to on that land.
    That along with as we move to more and more long term 
contracts so that our mill owners and our loggers know that 
they have something that provides some certainty so that they 
can invest in new equipment, make the investment to hire 
people, make the investment in their mills. These are things 
that are starting to change the dynamics that we've been 
dealing with for the last few decades. Those are the things 
that we're really focused on to be able to increase the 
restoration work, increase the amount of harvest that's coming 
off of the national forests.
    Senator Barrasso. Thank you, Mr. Chairman.
    The Chairman. I thank the Senator.
    Senator from New Mexico.
    Senator Heinrich. Thank you, Chairman.
    I want to thank both you and the Ranking Member for having 
this hearing. This is an issue where there's actually quite a 
lot of agreement. I think concern on both sides of the aisle, 
something that touches communities throughout the Intermountain 
West.
    Chief Tidwell, good to see you again. I wanted to point out 
and I appreciate your comments in your earlier testimony 
because you touched on some of the things that I hear 
consistently back home. In New Mexico many counties use their 
SRS funds to carry outward for stewardship projects. They 
reduce the risk of catastrophic wildfire to communities.
    New Mexico counties also support local fire fighting and 
emergency response units that are viable when fire strike close 
to homes and businesses as well as search and rescue efforts. I 
know that the Forest Service works closely with forest 
communities to prepare for wildfire and to respond to 
catastrophic wildfires.
    What role do SRS funds play in making that collaboration 
possible for those communities?
    Mr. Tidwell. There's a couple ways. The first thing with 
Secure Rural School payments it provides that certainty to the 
county so they know what they can plan on for the funding 
they'll have for their roads and schools program.
    But the second part is the Title II and Title III funds 
that the counties can choose to basically share some of the 
payments to do work on the national forest or to be able to do 
the wildfire community protection planning or also deal with 
emergency services.
    The other key part of this is also the Resource Advisory 
Committees. Because of the requirement when Secure Rural 
Schools was first authorized it required this diverse set of 
interests to come together and often in places for the first 
time. It was a requirement. It provided the catalyst, the 
incentive of these diverse interests to come together and to be 
able to find ways to agree on what type of work should go 
forward.
    Because of that, I really believe that Secure Rural Schools 
should get a lot of credit for helping us to really kick start 
the collaborative processes that we see across the country. So 
it's been an additional benefit that I don't even think the 
Chairman, when he worked so hard on this initially, that he 
recognized really that this additional benefit was going to 
come out of this act. So I just want to make--I want to stress 
that because it goes way beyond the payments.
    Because of these efforts, these diverse interests that have 
come together, we've seen some diversification of economies in 
these communities. It's really helped to provide sustainable 
economies in these countries. Of course, by working together to 
deal with the wildfire threat that you, especially in your 
State, have had to deal with the last 2 years.
    Senator Heinrich. If that funding stream were not available 
to these counties how would it also change how the 
responsibilities that the Forest Service has and what you would 
have to do differently in order to fill that void in terms of 
additional stewardship projects, additional fire management and 
interface issues? How would it change things if this funding 
stream weren't there for the counties to be a good local 
partner?
    Mr. Tidwell. It would stress our use of our appropriated 
funds. It would, I think, really limit what the counties can do 
to be a partner. The counties want to be a partner in this 
work.
    That's the other benefit that comes from Secure Rural 
Schools. It allows them to make the decision to dedicate some 
of their funding toward this work. So it lets them be at the 
table. Helps them to be able to be a better partner as we work 
together.
    Without these funds it will be difficult, especially in 
today's budget climates, for us to be able to find the 
additional appropriations to make up for the loss of this, the 
work that gets done with these funds.
    Senator Heinrich. There's been some discussion in Congress 
about returning to the model where county payments are 
dependent on revenues generated by our national forests. I'll 
be the first to admit that New Mexico forests are a little 
different than Oregon and Washington and Alaska in that we have 
very arid forests where oftentimes sometimes it takes 200, 300 
years to grow a mature Ponderosa Pine. So sometimes we need to 
pull biomass off the forest. But we're not producing sawmill 
timber as a result.
    So I'm curious what you think that--what would that, you 
know, that linkage of revenues to county payments mean for 
forest management, particularly in Southwestern arid States?
    Mr. Tidwell. Senator, I don't anticipate any change in what 
we're doing. The work that's being done on the national forests 
is driven by what the public wants and what the land needs. So 
the amount of harvest, whether through timber sales or 
stewardship contracting, I don't think that's going to change.
    What will change is the need to get more of this work done. 
We're going to continue to do that, with or without. But I 
wouldn't expect to see any change in the management.
    Senator Heinrich. OK. Thank you very much, Chief.
    The Chairman. Thank you, Senator Heinrich. We're very 
fortunate to have an actual forester as a member of this 
committee.
    Senator Risch, welcome.
    Senator Risch. Thank you very much, Mr. Chairman.
    I--this is an issue that obviously in a lot of our States 
is critically important. I was interested in the GAO report. I 
hadn't read it until we--I got ready for this hearing.
    This is no reflection on you, Ms. Fennell, but let me tell 
you something. I have real confidence in the county's being 
able to spend this money. Indeed I have more confidence in the 
county's being able to spend this money than I do the Federal 
Government.
    I have no doubt they'll make some mistakes. But I can 
guarantee you they won't be nearly as big a mistake as the 
Federal Government would make if they were spending the money. 
So appreciate what you're doing, but they're probably going to 
do alright out there.
    In this town it's kind of hard to explain this to people, 
but Senator Wyden knows this and Senator Murkowski knows this. 
When you go out into the--well and Senator Heinrich knows this 
too. When you go out into the hinter lands you'll find counties 
that are managed pretty well by people who are well educated 
and well schooled in what they're doing. Then you'll find other 
counties that are run by the people.
    So as a result of that it's less formal than what we're 
used to. So you're going to find those kinds of things when you 
go out there. But in any event, keep up the good work. But I 
have real confidence in the county's being able to make this 
work if we get them the money.
    Thank you, Mr. Chairman.
    The Chairman. I thank my colleague.
    Let's go to a few additional questions. I want to stay with 
you, Chief and you, Ms. Haze, to go into some of what's being 
debated with respect to our approaches for the future.
    I've tried to describe our approach both short term and 
long term as a dual track. So we get the cut up and 
particularly, Chief, you've mentioned doing that through the 
collaborative approach which I think makes a lot of sense. We 
recognized that Secure Rural Schools is certainly going to be 
needed in the short term. There are some approaches for the 
future, long term, that involve revenue sharing.
    So I call that the dual track. Get the cut up and also 
ensure that we have Secure Rural Schools as a kind of bridge. 
There are some who are advocating what I call a one track 
strategy where they're saying we don't need Secure Rural 
Schools. We can just get there by getting the cut up. We get 
the volume up that will take care of it.
    Now I've already made it clear again and again, probably 
more times than colleagues want to hear. I'm for getting the 
cut up. But I'm trying to get my arms around the idea of what 
level of timber harvest would be needed in the short term to 
keep these communities afloat in terms of law enforcement and 
schools and essentials and how that would be achievable.
    Can you give us some sense of that, Chief, if you just said 
we're going to drop Secure Rural Schools and we'll just do it 
by getting the cut up? What would that require say, in the next 
couple of years?
    Mr. Tidwell. Mr. Chairman, to provide the same level of 
funding that the counties have received under Secure Rural 
Schools on the national forests we'd have to increase our 
harvest to 16.8 billion board feet. That's based on today's 
prices.
    That's the other thing I wanted to stress is that, the saw 
timber prices have been going up for the last year which is 
very helpful. But before that we were at some of the lowest 
prices that I've seen throughout my career. The stumpage value 
of the timber coming off the national forests has been at the 
lowest point in my entire career. So that too has had a 
significant reduction in our revenues.
    Hopefully, as the housing market improves and we continue 
to expand markets over the biomass, the wood off the national 
forests, that we'll see a continued improvement in the markets. 
But at today's market it would take 16.8 billion board feet off 
just the national forests to provide the same level of revenues 
that we provided through Secure Rural Schools last year.
    The Chairman. Ms. Haze.
    Ms. Haze. So just looking at the numbers. If our payments 
to the counties this year was 38 million. If there is no Secure 
Rural Schools maximum revenue sharing would be $10 million. So 
a 4-fold increase----
    The Chairman. In the cut.
    Ms. Haze. In the revenues generated. I can't personally 
tell you what that means in the cut.
    The Chairman. OK.
    Just 2 other points to move along quickly as I see Senator 
Lee is here and we want to give him another opportunity to ask 
questions.
    Chief, I especially note your point about the Resource 
Advisory Committees. Senator Craig and I, when we talked about 
them, we thought they were going to work well because the idea 
was they would get people talking who had never talked, you 
know, before. But based on what I hear in rural communities, 
this is not something that we dreamed up in Washington, DC.
    In the smallest nooks and crannies of our State, where the 
Federal Government owns land, people say that these Resource 
Advisory Committees are working beyond anything they imagined. 
That you've got people in the timber industry and environmental 
folks, who practically were screaming at each other before, 
looking for common ground. It's because a project can't go 
forward under a RAC unless you do reach common ground.
    So I appreciate what you've had to say. I want you to know, 
since we've had some conversations, that as we look to the 
future in terms of some of these revenue sharing ideas. We are 
going to build on your collaborative thinking and these 
Resource Advisory Committee because that has been a part of 
Secure Rural Schools.
    It probably didn't get a lot of attention because people 
want to talk obviously about the finances. But it is making a 
difference. It's making a difference in terms of bringing 
communities together so we can have jobs and protect our 
treasures.
    One last question for you, if I might, Chief. As you know 
the communities are very concerned about the impact with 
respect to the sequester and these payments that have already 
gone out to the counties. What can be done to make sure that 
these communities are in a position to get funding, even if we 
have to get the sequester part resolved? I saw some comments 
indicating that it would be taken from the RACs which concerned 
me simply because you made the case that the RACs are working 
so well.
    So what can we tell these rural communities that have just 
gotten pounded recently about the prospects of your working 
with them so we can make them whole on this situation with the 
budget?
    Mr. Tidwell. Senator, we're in the process of informing the 
States and the counties that the Secure Rural School payments 
are subject to sequester. Where we went out ahead and sent out 
the title, the Title I and the Title III payments back in 
December. We're--for the States that receive Title II we're 
going to provide them the option that if they want to just take 
the full sequestered amount out of the Title II payment which 
will reduce the amount of work that can be done, we'll give 
them the option.
    I just regret that we're in a position to have to inform 
the States that we're going to have to, reduce the Title II. 
For the States that do not receive Title II funds we will have 
to work with them to get--to recover 5 percent of their 
payments.
    The Chairman. Chief, I know you didn't dream up the 
sequester. I understand that. You're playing a tough hand.
    If you'll keep working with me and the committee, there's 
just enormous concern in these rural areas that even that 
amount which in a lot of programs doesn't sound like, you know, 
much. These are communities that are hurting so badly it really 
means a lot. I need to keep working with you on it.
    Let's, at this point, if Senator Murkowski is acceptable 
we'll go to Senator Lee and then we'll go to Senator Murkowski. 
We'll start--we've already started the second round.
    Senator Lee, welcome and appreciate all your interest on 
this.
    Senator Lee. Thank you very much. Thanks to you and Senator 
Murkowski for accommodating me in this.
    Ms. Haze, I've got some questions regarding PILT. PILT is 
an important program for my State considering that the Federal 
Government owns about two-thirds of the land in Utah. As a 
result of that, States like mine depend pretty heavily on PILT 
payments. But it's important for us to keep in mind a few 
factors including the fact that the cost of having a lot of 
Federal land in a particular county goes, I think, potentially 
far beyond the lost property tax revenue.
    It also, properly understood, has to include all the lost 
revenue that would come from economic development that might 
otherwise occur on that land. Whether that occurs in the form 
of traditional energy development or renewable energy 
development, certain kinds of recreational activities that may 
or may not occur on the land as a result of its Federal 
ownership or any other kind of economic activity.
    Now I understand that PILT was not intended to offset the 
lost revenue that might come from these lost economic 
development opportunities. I get that. But this context makes 
it important for us to consider those revenues when considering 
what PILT was designed to do.
    Now at the time PILT was enacted, at the time the program 
was created by Congress it was understood that the total funds 
received by most local governments under Federal lands to 
revenue and fee sharing statutes in existence at that time 
seldom approached the level of revenues that would be collected 
by ad valorem taxes, you know, the property taxes were these 
lands in private ownership. So judging from that language, from 
that legislative history from the understanding that was in 
place at the time PILT was created, the PILT program was, I 
believe, intended to make up that difference. With the goal 
being to make up for the lost revenues due to the presence of 
Federal land and not simply the compensation--not simply to 
provide compensation to counties for their out of pocket 
expenditures in terms of their maintenance of infrastructure, 
roads and other infrastructure on Federal land.
    So if that's the case then shouldn't payments under the 
PILT program be made at least to be roughly equivalent to what 
those counties might be receiving in ad valorem property taxes?
    Ms. Haze. So I appreciate your question.
    I can only answer that the PILT act, the way that it's 
constructed now, specifically defines per acre values and a 
sliding population scale to be used for the payments. When 
Congress enacted it in 1976 I've gone back and read some of the 
history around the long debates over it. I mean there were a 
lot of debates about the equivalency to local taxes and to the 
tax base. It's not perfect by any stretch, but there was a lot 
of angst and agonizing about how to establish rates for the 
act.
    Senator Lee. You can certainly sympathize with those taxing 
jurisdictions and the plight that they incur because you 
concede, I assume, that in most, nearly all instances, the 
amount that they receive under PILT is a very small, small 
fraction of what they might otherwise receive if they were able 
to tax those lands, even if it was at the lowest rate, say the 
green belt rate.
    Ms. Haze. So I'll say I think the next panel has a couple 
people who will be able to speak very clearly to the lack of 
equity across and how the payments impact individual counties. 
It varies because of the population factors. It varies because 
of the acreage, clearly. Then one of the very big variables is 
that the payments factor in a deduction for prior year revenue 
payments.
    So if there are large revenue payments then the PILT 
payment goes down.
    Senator Lee. Right.
    Now the Federal Government is, by far, the largest land 
owner in the United States. No one else comes close or even 
comes close to coming close. The Federal Government owns about 
30 percent of the land mass in the United States.
    Most of that land is concentrated in the Western United 
States. Most of that is concentrated in just a small handful of 
States where the Federal Government owns a majority or in the 
case of my State, a very substantial majority of the land. 
Given the fact that most of that land is concentrated in just a 
few Western States, when we're told over and over and over 
again as Westerners that hey, everyone benefits from Federal 
land ownership, don't you think there ought to be some offset?
    If everyone in the United States benefits from Federal land 
ownership than shouldn't those--isn't it a little bit unfair to 
make those who reside in those few States pay for what everyone 
else benefits from?
    Ms. Haze. I think I'm not the expert to comment on the 
fairness of it. Like I said, it's not perfect. It is the way 
Congress constructed it.
    I think those are the--those are clearly the debates you'll 
be having in reauthorization.
    Senator Lee. I understand Congress created it. I see my 
time is expired. I'll just leave you with a parting thought.
    Keep in mind as the Federal land manager of the largest 
swath of Federal land in our country, as you manage that we're 
already suffering because of the relative dearth of income that 
we have as a result of that Federal land ownership. There are 
things you can do to offset in some ways that absence of 
revenue in the way you manage it and what you permit and what 
you don't permit.
    Thank you very much.
    Thank you, Chairman.
    The Chairman. Thank my colleague.
    Let me tell the witnesses what's going to happen now. In 
addition to forestry being so important to the Oregon economy, 
international trade is as well, a real economic engine for our 
State.
    So Senator Cantwell is going to Chair the hearing for a bit 
so I can go down and make the case for expanding the 
opportunity to create more good paying jobs in trade. Then 
we'll come back to forestry.
    So, Senator Cantwell, you have not even had your first 
round. If Senator Murkowski is agreeable you would now Chair 
and ask any questions you may have. Then Senator Murkowski and 
Senator Risch have not had a second round.
    I appreciate the patience of both our colleagues and our 
witnesses. We are lucky to have Senator Cantwell step in now. I 
will return very shortly.
    Senator Cantwell, thank you.
    Senator Cantwell. [presiding] Thank you, Mr. Chairman.
    Chairman, I was actually going to go to the next panel. So 
I don't know if anybody has more questions for this panel.
    So, yes, Senator Murkowski.
    Senator Murkowski. Thank you.
    I guess to the entire panel here. You've heard the 
frustration clearly here. You all each have said that there is 
support for reauthorization of Secure Rural Schools, support 
for PILT and appreciation as to why the need, why the 
necessity.
    I guess the question for you is we've been talking about 
some of the proposals that we have. I have suggested that if 
you've got a Federal Government that's $16 and a half trillion 
in debt and we need other ways to find this reliable, steady 
funding stream that you've talked about, Chief. Let's look to 
some.
    The State of Alaska has come up with what I think is a 
reasonable proposal in terms of State management. Others have, 
I think Senator Barrasso was very clear in saying assign this, 
turn the Federal lands over to the counties, to the States. 
Look for other operations.
    You've suggested that what we need to do is we need to 
harvest more, but 16.8 billion board feet is what it would take 
this year to match what is going out in Secure Rural Schools 
funding. Probably not going to get there from here today.
    So I guess the question to you is surely if you support 
these programs you've noodled over what some of the options 
might be and how we pay for it. How--what the Administration's 
proposal is to pay for it? I guess an additional question would 
be are we going to see a legislative proposal contained within 
the budget when that comes out in the next month, I guess, or 
so?
    Can you tell me where your thought process is on what you 
might do to better provide for Secure Rural Schools and PILT?
    This is to you, Chief, Ms. Haze, Ms. Fennell? Go ahead.
    Mr. Tidwell. Senator I understand the difficulty of finding 
the finances. Senator Baucus, expressed that in his remarks 
earlier. There are a lot of different ideas out there that 
you've presented.
    Senator Wyden has presented others. Mr. Barrasso. So 
there's a lot of different ideas out there.
    So we are committed to work with the committee to be able 
to find ways to maybe move forward with some different ideas.
    Senator Murkowski. Do any of those ideas rise to the top of 
the stack? Are there any that you look at and say, that's a non 
starter?
    That would help us as a committee because we are looking 
for that longer term solution. Again, I think Senator Baucus 
doesn't want to be in the position of year after year trying to 
figure out how we piece this together. How we rob Peter to pay 
Paul, to use Senator Barrasso's expression here.
    Surely there must be something that you think is better 
than others?
    Mr. Tidwell. You know I'd like to just get back to you on 
that. I think we can probably identify some things from the 
Administration's view that are probably non starters so as not 
to spend time on some things like that. But I would like to 
just take the opportunity to be able to get back with the 
committee on some different ideas.
    Senator Murkowski. Ms. Haze.
    Ms. Haze. So I would--we're not at liberty to talk about 
the 2014 budget. But we can talk about the 2013 budget which 
included proposals to reauthorize both of these programs. 
Within the budget there were a number of offsetting ideas, 
revenue collecting ideas, some more challenging than others.
    So we could offer to go back and look at some of those and 
as the Chief suggested come back and have some more 
conversations.
    Senator Murkowski. Ms. Fennell, you want to jump in?
    Ms. Fennell. Thank you, Senator.
    We have not looked at the various options that are being 
proposed. Our work has principally looked most recently at the 
implementation and oversight of Title III of the Secure Rural 
School Act. So my comments are more specifically aligned with 
that.
    One lesson that I would take away from the work that we did 
is the importance of clarifying authorized uses for various 
funds, to limit confusion that exists amongst counties given 
how the counties are very tightly constrained with their 
current budgets. I would suggest that in terms of any changes 
to the law itself it would be important to consider clarity of 
terms to ensure that the authorized uses are clear to the 
counties that need to implement it.
    Senator Murkowski. I think where we will probably go from 
here, what I certainly will suggest to the Chairman is that we 
do have a sit down with you, Chief, with folks over Department 
of Interior. I think there is a real effort to try to figure 
out a longer term solution and how we might construct that is 
going to require an effort that is collaborative. In order for 
us to make this work it's going to have to work from, not only 
a bipartisan basis, but we've got to get folks on the West or 
on the East to understand why we have to do this in the West. I 
think the Administration needs to be part of these discussions 
as well.
    But I, for one, am weary, just weary of having to go back 
to constituents at home again who are looking at their 
communities and recognizing that from year to year they don't 
really know what's going to happen to them. Then you throw in 
just the calamity of sequester and declining budgets and then a 
lack of any clear, identifiable path on this. It's not right. 
It's not fair.
    So we've got a lot more work to do. Maybe when we're 
sitting together quietly we can come up with some good ideas. 
So thank you for being here today.
    Thank you, Madame Chair.
    Senator Cantwell. Thank you.
    Senator Risch.
    Senator Risch. Madame Chairman, thank you. It's twenty to 
noon and we got another panel to hear. So I'm going to yield my 
time back.
    Senator Cantwell. Thank you, Senator Risch.
    Let's call up--thank you all for being here to testify. I'm 
sure we'll have some follow up questions for you.
    Senator Cantwell. But let's move to the second panel that 
we have.
    I'd like to welcome them to the table.
    Paul Pearce, who is the President of the National Forest 
Counties and Schools Coalition.
    Mr. Ryan Yates, the National Association of Counties.
    Mr. Mark Haggerty, Headwaters Economics.
    Professor Jay O'Laughlin from the University of Idaho 
College of Natural Resources.
    I thank you all for coming today. I wanted to particularly 
thank you for your continued leadership on the County Payments 
program that includes the Secure Rural Schools and Payment in 
Lieu of Taxes. As you know these programs are critically 
important to the Pacific Northwest and across our country.
    I want to thank Paul Pearce for traveling across the 
country to testify today. He's been a long time partner on the 
County Payments program. I certainly have called on him many 
times.
    His home of Skamania County in Southwest Washington 
exemplifies the needs for these payments. Almost 80 percent of 
Skamania County is in the Gifford Pinchot National Forest 
making it non-taxable by the county. Other large portions of 
land are also owned by State and timber companies. In total 
about 2 percent of the county remains eligible to be taxed a 
full value.
    Now someone might say why do you, you know, why do you care 
if so much is already in timber land? Skamania County is also a 
gateway across our State in the Columbia Gorge. It's a source 
of major technology companies that are locating there as well 
as a huge tourism attraction. So Skamania County does need to 
operate. It does need revenue to operate.
    So the National Forests are key features across our State. 
Within 5 national forests and the Mount St. Helens volcanic 
monument, the Forest Service manages nearly 9.3 million acres 
or 21.7 percent of our entire State. Because over a fifth of 
the State is excluded from the tax base as a Forest Service 
land, it becomes clear that the county payments are not only 
essential to counties, but also an obligation of the Federal 
Government.
    The Federal Government's obligation extends beyond just the 
loss of tax base due to non-taxable Federal lands. These lands 
are also impose real cost on the counties. They include 
maintenance of roads, providing access, planning and managing 
forest fires and providing emergency services such as search 
and rescue operations. The Federal Government is obligation to 
compensate all these costs that many of our rural communities 
could not otherwise afford. The Federal Government also has the 
obligation to provide transitional assistance to these 
counties.
    So when abrupt changes to these programs have occurred I 
think our committee has worked in the past to extent and reform 
the county payments. I hope that we will make more direct 
connections between the obligations that the Federal Government 
has. How these payments are calculated and distributed.
    I believe that the formula must be simpler and more 
transparent. That it also should link directly to the all 
Federal Government obligations. That means that each and every 
variable in the formula needs to have a direct link. These 
payments are too important to put to jeopardy or gainsmanship 
here in the Federal arena.
    The County Payment program has proven effective and 
responsive and it is essential to our nation. Without this 
vital revenue counties in Washington State would lose more than 
$35 million in irreplaceable funds that are so critical for 
these programs that I just mentioned.
    So I look forward to having all of you have your testimony 
in the record. I hope that we'll give all our colleagues in 
Congress a clear understanding of these issues.
    Senator Murkowski, I didn't know if you wanted to make any 
further statements before this panel?
    If not, let's just go to the panel. We'll start with you, 
Mr. Pearce and we'll go right down the line.

    STATEMENT OF PAUL J. PEARCE, PRESIDENT, NATIONAL FOREST 
         COUNTIES AND SCHOOLS COALITION, STEVENSON, WA

    Mr. Pearce. Thank you very much, Senator Cantwell. It's 
very nice to see you again, especially in my new role.
    Obviously Senator Murkowski and members of the committee, 
thank you very much for this opportunity to testify.
    Counties and schools in 41 States and Puerto Rico wish to 
thank you for your leadership. We also want to thank Senator 
Wyden specifically for his co-sponsorship of SRS, wherein he 
recognized the damage being done to forest dependent 
communities and has worked tirelessly on their behalf.
    I thank Senator Cantwell for her hard work on this. I 
remember several floor speeches that--where I sat and listened 
to someone really fight hard for counties. Thank you very much 
for that.
    Senator Murkowski for your work on forest health, second to 
none.
    We want to thank Senator Murray for her unending support of 
counties and schools including the Chairman's mark this last 
week in the Senate budget for SRS and PILT.
    Congress passed the 1908 act, the 25 percent act which 
created a contract with the counties for revenue sharing. It 
was the first in the Nation.
    The Weeks Act of 1911 became the legislation for creating 
Eastern and Southern national forests including them in this 
same contract. The contract worked well into the late 18--or 
1980s when court decisions endangered species listings and 
agency priorities and a general change in the priorities of the 
Nation dramatically reduced extraction activities on public 
lands including timber.
    In 1992 Congress created owl guarantee moneys for those 
communities hardest hit by the spotted owl listing.
    In 2000 Congress passed the Secure Rural Schools Act which 
authorized payments through 2006.
    In 2007 it's been reauthorized 3 times up to this last 
year, 2012. We thank you very much for that.
    SRS Title I payments are direct payments to counties and 
schools. A handful of counties they're used for county roads 
and schools. A handful of counties can use these funds to 
support libraries, public health, law enforcement and other 
services besides roads.
    Dr. Eyler's report which is attached, shows that a loss of 
SRS payments will result in a loss of $1.3 billion in sales, 
$178 million in realized tax revenue at the local, State and 
Federal level, over 10,000 jobs, these would include 3,000 
education jobs and 1,400 jobs in counties and county road 
departments.
    My own county, Skamania County, is a county of 11,500 
people. I was a commissioner there until this last--until just 
the beginning of this year. The last 2 years of actual 25 
percent payments we made over $7 million per year. SRS in 2006 
was approximately $6 million. This past year our, the payment 
to the county, was $1.8 million. If we were to lose this 
funding 2 of the 4 school districts in the county will in fact 
close.
    SRS Title II are moneys used for forest projects utilizing 
the Resource Advisory Committees, or the RACs. The amount of 
these funds are determined by county commissioners in each 
forest county between 8 and 20 percent of their counties share 
the State's payments. This has been a highly successful 
program.
    We've heard earlier talk about the collaboration. These 
collaboratives actually work. In Sitka, Alaska RAC funds the 
science mentor program partnering high school students with 
Forest Service Fish and Game and the University of Alaska to 
collect and analyze data on the Tongass National Forest.
    In Louisiana on the Kisatchie National Forest RAC funds 
have been used to leverage other funds securing completion of 
road repair, environmental mitigation, safety challenges.
    In Oregon the Medford RAC restored a 3 mile section of 
Spencer Creek near Keno in order to revive the creek's natural 
habitat and increase the population of native species.
    So this is actual work being done on the forest using these 
funds and the RACs.
    Title III funds are reimbursement for emergency services, 
community wildfire planning and fire wise implementation.
    Examples of 2 searches this last year include a hiker, who 
fell into the Mount St. Helens crater, eventually costing 
local, State and Federal agencies over $150,000.
    The second involved a 2-week search for a young woman lost 
in the Columbia River gorge costing local, State and Federal 
agencies $550,000.
    These are 2 examples in one forested area. Without Title 
III the counties could not absorb these costs.
    In closing, reference to SRS reauthorizing we would 
respectfully request that new language state, ``All counties 
opting to receive a portion of the State payment will receive 
an amount equal to their Fiscal Year 2010 payment which was 
received in January 2011.'' Further, we agree with the 
Chairman, who said recently, a short term extension of SRS is 
not a long term solution for these communities. We in fact 
pledge to work to enact legislation that provides bridge 
funding to forested counties and school districts and believe 
that long term economic vitality must include active, 
sustainable forest management to achieve resilient forest 
lands.
    Thank you very much for your time. I'll answer whatever 
questions you might have.
    [The prepared statement of Mr. Pearce follows:]

    Prepared Statement of Paul J. Pearce, President National Forest 
             Counties and Schools Coalition, Stevenson, WA

    Chairman Wyden, Ranking Member Murkowski, members of the committee 
and guests. Thank you for the opportunity to appear before you today on 
this topic of intense interest and concern to the National Forest 
Counties and Schools.
    Before I begin and on behalf of Counties and Schools, from Alaska 
to Texas . . .  Washington to Florida  . . . in 41 states and Puerto 
Rico, I wish to thank Senator Wyden for his continued leadership. As 
the original co-sponsor of the Secure Rural Schools legislation he 
recognized the damage being done to these forest dependent communities 
and has tirelessly continued these efforts through a multitude of 
reauthorization successes.
    I additionally wish to thank Senator Murkowski for her hard work 
over the years on SRS and forest health issues.
    And we wish to thank Senator Murray, Budget Committee Chair, who 
has always supported Counties and Schools, including as a Chairman's 
mark both SRS and PILT as deficit neutral programs in the current 
Senate budget.
    Seven hundred twenty nine (729) or 24 percent, of the nation's 
three thousand sixty nine (3069) counties contain national forests, 
some equaling up to 90 percent of their land mass. The 154 National 
Forests cover an area of 193 million acres across this country. These 
counties are responsible for the infrastructure including roads, 
schools, and emergency services that allow those forests to be used, 
and gateway communities to survive. Thereby fulfilling the promise of 
Gifford Pinchot; ``that no community would suffer for housing National 
Forests'''.
    In 1891 the Congress created Forest Reserve authority through the 
General Revision Act. By 1905 those reserves had grown to more than 80 
million acres. President Roosevelt remade the U.S. Bureau of Forestry 
into the USDA Forest Service with Gifford Pinchot as the first chief 
forester. That began a three year process which resulted in Congress 
transferring all forest reserves to the new Forest Service.
    The 1908 Act also concluded the conversation between the Counties 
containing these forests, Congress and the Administration. The contract 
was for revenue sharing, the first in the nation, of a share of all 
revenues generated on these lands. This clearly made sense at the time 
as the growing nation extracted renewable resources for the good of 
all.
    The Weeks act was signed into law on March 1st, 1911 becoming the 
mechanism for the creation of our Eastern and Southern National 
forests, including them in the contract for revenue sharing. The 
contract worked well for nearly a century, into the late 1980's, when 
court decisions, endangered species listings, such as the spotted owl, 
agency priorities and a general change in the priorities of the nation 
dramatically reduced extraction activities on public lands including 
timber.
    In 1992 Congress created Owl Guarantee monies for those counties 
hardest hit by the northern spotted owl endangered species listing.
    In 2000 Congress passed the Secure Rural School and Communities 
Self Determination Act which authorized payments through 2006. These 
payments were a life saver for our forest counties. In 2007 Congress 
reauthorized the act for one year and then in 2008 reauthorized it for 
an additional four years through 2011. This reauthorization could not 
have come at a more appropriate time and clearly recognized the ongoing 
contract between these forest Counties and the Federal government--and 
what a tremendous success it has been.
    And as you all aware Congress reauthorized the program for an 
additional year in 2012.
    The Act has three Titles, each of which carries clearly defined 
responsibilities.

                                TITLE I

    These are direct payments for county roads and schools. In a 
handful of counties these funds are available as general fund dollars 
supporting among other services libraries, public health and law 
enforcement. Each state determines the division of these funds between 
Counties and Schools based on the original 1908 revenue sharing law. 
This money equates almost exclusively in these communities to jobs; 
county road department and school employees. Without this symbiotic 
relationship our children would not be able to get to school, often 
over large distances, nor in many cases would they necessarily have 
schools to attend or teachers to instruct them within their own 
communities.
    These gateway communities to our national forests would simply not 
exist without this infrastructure. These County roads are how the vast 
population that recreates on these millions of acres travel to and from 
them. In fact, many roads inside the National Forests are owned or 
maintained by Counties.
    Also, we need to explore the impact SRS has on rural road 
maintenance and the far-reaching impacts to health and safety issues. 
According to the Fatality Analysis Reporting System (FARS), every year 
nearly 25,000 people die in rural road crashes (accounting for 58 
percent of total road fatalities) across this nation. Traffic crashes 
are assessed to be the one of the nation's most costly health problems.
    The fatalities and injuries associated with rural auto accidents 
come as no surprise to those of us who represent rural communities. The 
Department of Transportation documents, ``8.4 million lane-miles of 
roads in the United States, with over 6 million of these rural.'' Rural 
areas face numerous unique highway safety challenges. Crashes usually 
occur at higher speeds than accidents in urban areas, and due to remote 
locations, it often takes longer for emergency assistance to arrive at 
the scene.
    Any abandonment of maintenance of rural roads will compound 
existing infrastructure problems and greatly contribute to future 
economic, health and social problems including an increased level in 
rural road fatalities.
    According to Dr. Eyler, Economic Forensics and Analytics, (report 
attached) the loss of Secure Rural Schools and Community Self-
Determination Act payments, averaged over the FY 2008 to FY 2021 
period, $1.296 billion in sales revenues, government at all levels 
losing over $178 million in tax receipts, and over 10,400 people losing 
their job. These job losses include over 3000 jobs in education and 
over 1400 in County Roads.
    Loss of one family wage job in these rural communities often 
results in the entire family having to leave the community to find 
work. This results in the spouse quitting their job, children being 
withdrawn from school, lowering enrollment causing even greater 
economic hardship and job loss.
    According to the Sierra Institute report (attached) on the 20 year 
cumulative impacts to the Counties of Washington, Oregon and California 
impacted by Northern spotted Owl critical habitat there are far 
reaching impacts to these communities;
    Case studies, two in California and three each in Oregon and 
Washington were conducted to better understand socioeconomic changes 
and current socioeconomic conditions ``on the ground.'' Some key 
findings from these cases include in California:

   Siskiyou County lost all its saw mills, has seen its 
        population age, and has lost eight schools, challenging the 
        county to provide for the remaining students and reverse the 
        loss of young families.
   In Humboldt County there are powerfully suggestive 
        relationships between mill closures and student impoverishment 
        as reflected in Free and Reduced Price Meal (FRPM) enrollment 
        rates. This county has suffered dramatic declines in its goods- 
        producing sector, with the manufacturing subsector losing 65 
        percent of its 1990 jobs by 2011.
            In Oregon
   Tillamook County has 24 percent of its children living in 
        poverty, and 39 percent living in single- parent households, 
        almost double the national average.
   Douglas County has 31 percent of its children living in 
        poverty--twice the national average and 34 percent in single-
        parent households.
   In both of these counties, but especially in Douglas County, 
        there are significant declines in manufacturing jobs, 
        particularly since 2008. Free and Reduced Priced Meals 
        participation rates increased over the last four years as well, 
        some schools by almost 20 percent.
   Josephine County, over the last several decades saw forestry 
        and logging jobs decline by 80 percent. Wages have stagnated 
        and are two-thirds of the Oregon average. The county now ranks 
        near the bottom of Oregon counties in health indicators and 
        FRPM participation rate for the county is 70 percent.
            In Washington
   Grays Harbor County Natural Resources and Mining jobs 
        declined by over 50 percent and Forestry and logging jobs by 
        just under 70 percent from 1990 to 2010. The county is near the 
        bottom of the health rankings for counties in the state. FRPM 
        participation rates for the county exceed 60 percent, with one 
        school district at 92 percent in 2011 and another at 88 
        percent; the lowest rate is 41 percent, reflecting the 
        considerable differences across the county.
   Skamania County has 90 percent of its land in federal 
        ownership, and 59 percent of the land in the county is 
        designated as critical habitat area. Natural resource and 
        manufacturing jobs have declined by over 50 percent over the 
        last 20 years.

    Secure Rural School and Community Self- Determination Act (SRS) 
payments to replace lost timber receipts to counties and schools have 
been historically important. In California, on average, Humboldt County 
Schools received just under 5 percent of their funding through SRS; 
Siskiyou received on average just under 7 percent; and Trinity County 
received 15 percent. In Oregon, U.S. Forest Service SRS funding has 
provided on average 23 percent of county road budgets, with six 
counties receiving over 40 percentof their total road budget. Though 
dramatically lower in 2011, SRS payments comprised 40 percent or more 
of Skamania County general fund throughout the 2000s. In Oregon ., the 
Bureau of Land Management contribution to county budgets has been 
significant. In Douglas County in 2009 it comprised 17 percent of total 
county revenues and in Jackson County; it makes up 7 percent of total 
county revenues.

    We wish to thank Congress for having continued these payments in 
lieu of revenue sharing which have resulted in ositive economic benefit 
to our communities and schools. Without them the economic damage would 
clearly be significantly worse.

                                TITLE II

    These are monies specifically to be used for projects on or of 
benefit to the forest itself utilizing one of the greatest successes of 
this entire act, the Resource Advisory Committees, or as they are known 
RAC's.
    Membership on the 15-member RAC is balanced to reflect the array of 
interests and users of Public Lands:

   Five members represent commodity interests such as grazing 
        permittees, commercial timber, energy and mining, developed 
        recreation and/or off-highway vehicle groups, and 
        transportation & rights-of-way.
   Five members represent conservation interests such as 
        environmental organizations, historic & cultural interests, 
        conservation, and dispersed recreation.
   Five members represent community interests such as elected 
        officials, Indian Tribes, State resource agencies, academicians 
        involved in natural sciences, and the public-at-large.

    For a project to be approved it must have a majority of votes from 
each of the five member groups. RAC's are the most successful 
nationwide collaborative effort today within the forest system. Well 
over 6000 projects have been implemented on the forests without a 
single appeal. These projects occur in the Southern, Lake, 
Intermountain West, and Western states. Many of the RAC's actually meet 
to collaborate successfully on projects outside of the use of Title II 
monies.
    In Alaska, Sitka is a small rural community that is completely 
surrounded by the Tongass National Forest. One of the RAC projects is 
the Science Mentor Program. This program partners high school students 
with land and resource managers from the US Forest Service, State of 
Alaska Department of Fish and Game, and University of Alaska 
Researchers, to help collect and analyze important research and 
monitoring data on natural resources in the lands and waters of the 
Tongass National Forest. Outputs of this project produce publishable 
scientific research materials that also serve to help guide management 
activities. Additionally, the project gives students scientific 
research experience and prepares them for University pursuits and 
future careers as land managers and scientists. The project has already 
inspired several young women to pursue science careers. In addition to 
the benefits to future leaders, the projects gives resource managers an 
opportunity to engage the larger public on the research and management 
topics that they are working on and educate the larger public on public 
lands and natural resource management issues.
    In SW Idaho a project the RAC funding assisted with concerned 
access to private property and public land which required fording a 
sensitive stream where endangered Salmon spawned. This project was too 
costly for individual agencies to fund. Using the RAC process and Title 
II funding the project brought together the County, Forest Service, the 
Nez Perce Tribe and local landowners to pool all their resources to 
build a bridge to eliminate the impacts to the Salmon habitat and 
provided the needed access to the private property and the public lands 
beyond.
    In Socorro County, New Mexico they were able to improve drainage 
and chip seal Hop Canyon Road in the Magdalena area (all the way to the 
Fire Station). They used the $226K in Title II funds for materials and 
provided all equipment and labor through the County so they could 
complete more of the road. Without these improvements, the road would 
have continued to wash out (they have a FEMA disaster claim on this 
road due to flooding), essentially cutting off residents. For the next 
project, they will use the $51K in available Title II money to repair 
and reseal Water Canyon Road. This is so important; they even 
negotiated an MOU with New Mexico Tech to pay for some of the materials 
as the road leads to the MRO observatory and is a high-use campground
    In Washington on the Gifford Pinchot there is the Forest Youth 
Success program which was funded from Title III under the 2000 Act and 
is now funded through Title II. As collaboration between the County, 
Schools and Forest Service this program puts up to 40 high school age 
kids to work on crews in the forest on restoration projects throughout 
the summer. Recently Washington State University conducted a survey of 
the past participants of the program and found some very interesting 
initial data. Some of the reported outcomes:

   100 percent said FYS increased their life skills such as 
        team work and leadership.
   97 percent said they learned important workplace skills such 
        as punctuality and responsibility.
   92 percent said they increased their use of financial 
        resources.
   69 percent said FYS influenced the shaping of their career 
        choices.
   47 percent said FYS shaped their college degree goals.

    In Louisiana, on the Kisatchie National Forest, RAC monies have 
been used to leverage local funds and secure completion of road repair, 
environmental issues, and safety challenges. Monies have been used to 
protect endangered species, protect water quality, hard surface roads, 
and provide safe access to public recreational areas. Support from the 
public and private sectors have contributed greatly to the efficient 
and judicious use of federal monies.
    In Oregon the Medford RAC approved funding that restored a three-
mile section of Spencer Creek near Keno, Oregon. Over 50 log 
structures, created from 220 cull logs salvaged from local timber 
sales, were placed in the creek to reestablish its original character. 
Additionally, the project plans to restore the creek's natural habitat 
and increase the population and distribution of native fish and 
amphibians, including the Klamath River redband trout, Klamath small-
scale sucker, lamprey, and Pacific giant salamander.

                               TITLE III

    Referred to as County Funds, in the original act the purpose of 
these funds included emergency services on the forest, fire planning, 
community service work camps, easement purchases, forest related after 
school programs and planning efforts to reduce or mitigate the impact 
of development on adjacent Federal lands.
    The 2008 reauthorization removed all categories except emergency 
services and community wildfire planning and implementation.
    In terms of search and rescue I will cover just two examples. On 
the 1.2 million acre Gifford Pinchot National Forest which includes the 
Mt St Helens National Monument and the 80,000 acres of the Columbia 
Gorge Scenic Area. In this area, close to the Portland metropolitan 
area, search and rescue events are frequent. The volunteer searchers 
are not reimbursed except for their mileage. Yet the average search 
costs are in the several thousand dollar range for those searches 
lasting just a few days and not requiring aircraft. That being said, in 
2011 alone the following searches resulted in the hundreds of thousands 
of dollars.
    The first was a hiker who fell into the Mount St Helens crater. The 
total local, state and federal cost reached over $150,000.
    The second involved a two week search for a young woman who was 
lost in the Columbia River Gorge. This incident eventually cost local, 
state and federal taxpayers $550,000.
    Sadly, both cases ended up being recoveries rather than rescues. 
Without Title III and assistance from both state and federal resources 
our counties could not afford these costs. Multiply these examples 
across the US Forest Service system and you begin to understand the 
immensity of cost associated with these activities which fall to the 
Counties to manage.

                        CLOSING RECOMMENDATIONS

    On reauthorization of the act we respectfully suggest that new 
language simply state; All counties opting to receive a portion of the 
state payment will receive an amount equal to their Fiscal Year 2010 
payment, which was received in January 2011. This would return the 
program to a more equitable basis for all Counties and Schools, with a 
minimal additional cost and would replace the current formula which is 
cumbersome and impossible for a lay person to interpret.
    As an example Skamania County, my home, in Washington received our 
last 25 percent payment in 1992 of $7 million dollars each to the 
County and the Schools. Our SRS payment in 2006 was a little less than 
$6 million each. Our 2012 payment just received was $1.8 million each. 
The 2010 SRS payment was $3.8 million, a substantial reduction in its 
own right.
    Further, we agree with the Chairman who said in a recent article 
``A short-term extension [of SRS] is not a long-term solution for these 
communities. We've got to get our people back to work in the woods, for 
example. We have got to increase the number of jobs in resource-
dependent communities where there's federal lands and federal water. We 
believe that can be done consistent with protecting our environmental 
values.''
    Our mission statement* and Principles for Legislation (attached) 
echoes that sentiment; Long term economic vitality must include 
legislation requiring active sustainable forest management to achieve 
resilient forest lands managed by the US Forest Service and . the 
Bureau of Land Management.
---------------------------------------------------------------------------
    * The mission statement and Principles for Legislation has been 
retained in committee file.
---------------------------------------------------------------------------
    Additionally, on the issue of reauthorization of Stewardship 
Contracting we feel it is extremely important that a conversation occur 
between Congress and the Counties as to its impact on the revenue 
sharing contract between us before it is permanently reauthorized.
    Thank you once again for the opportunity to speak about the success 
of the Secure Rural Schools and Community Self-Determination Act.

    Senator Cantwell. Thank you, Mr. Pearce.
    Mr. Yates, thank you for being here.

  STATEMENT OF RYAN R. YATES, ASSOCIATE LEGISLATIVE DIRECTOR, 
    LEGISLATIVE AFFAIRS DEPARTMENT, NATIONAL ASSOCIATION OF 
                            COUNTIES

    Mr. Yates. Thank you, Senator Cantwell, Ranking Member 
Murkowski and members of the committee.
    Thank you for the opportunity to testify on behalf of the 
Nation's 3,069 counties, parishes, boroughs to provide insight 
on the Payment in Lieu of Taxes program. For more than 30 years 
the PILT program has provided payments to counties and other 
local governments to offset losses in tax revenues due the 
presence of substantial acreage of Federal land within their 
jurisdictions. Since local governments are unable to tax the 
property values or products derived from Federal lands these 
payments are essential to support local government services.
    Congress passed the Payment in Lieu of Taxes act in 1976. 
The impetus for its passage was the passage of FLPMA which 
specifically established the disposal of public lands would 
largely cease. In lieu of a future in which lands could 
continue to pass from Federal ownership to private ownership, 
Congress opted to reimburse local governments for land that 
would remain in Federal Government in lieu of paying direct 
property taxes.
    Historically payments were limited to an amount 
appropriated by Congress. Initially authorized at $100 million, 
that amount was appropriated annually during the first decade 
of the act. Following strong pressure from NACO and counties 
the act was amended in 1994 to provide for a more equitable 
authorization level in light of the disparities that existed 
between property values and current PILT payments. The law, as 
amended, using the Consumer Price Index to adjust the 
population limitation and the per dollar acre amounts used to 
calculate payments.
    From 1994 to 2007 the authorized level and the appropriated 
level began to diverge. Since the authorization crept up that 
amount equal to the CPI each year while the appropriations 
stayed roughly constant.
    In 2008 Congress enacted the Emergency Economic 
Stabilization Act of 2008 which authorized counties to receive 
their full PILT entitlement for Fiscal Years 2008 through 
Fiscal Year 2012. All mandatory funding minus a 5.1 percent 
sequestration cut will be available for counties through the 
enactment of MAP21 last year which provided 1 year of an 
additional mandatory funding for Fiscal Year 2013.
    Last week Senate Budget Committee Chairwoman Patty Murray 
made continued funding of the PILT program and the 
reauthorization of SRS a priority in a proposed Committee 
Budget for Fiscal Year 2014. The proposed budget resolution 
included a deficit neutral reserve fund for rural counties and 
schools to provide for the reauthorization of SRS and/or 
changes to PILT. They could believe several policy 
modifications could be explored by Congress to identify ways to 
make payments to counties more equitable, a range of possible 
alternatives could be considered to more evenly distribute PILT 
funds to counties to provide greater budget certainty.
    Over time some programmatic anomalies have become evident. 
Among these are the non inclusion of Federal acquisitions, 
substantially reduced payments to jurisdictions with large 
Federal estates and the inability of current formulas to 
account for externally induced costs resulting from Federal 
land use by persons originating from outside of the county.
    First, the use of population caps may not be the most 
appropriate method for providing fair allocation. Depending on 
the current county population the PILT payments are capped at 
predetermined levels. The use of population caps fails to 
accurately demonstrate the actual population of people being 
serviced by the county.
    For example, counties with large acreages of Federal land 
and small populations are often gateway communities to 
recreation areas in the national forest and national park 
system. County governments are required by law to provide 
services to people regardless of their place of residence.
    An additional formula inequity has occurred due to the 
formulas used in prior year payments. Revenue sharing payments 
identified as prior year payments provide funding to county 
governments such as the Mineral Leasing act and Secure Rural 
Schools payments. However payments from these programs reduce 
the amount of PILT funding to many resource dependent counties. 
The Federal Government should not reduce its tax obligation to 
local governments solely because other land management revenue 
agreements between--because of land management revenue 
agreements between governments.
    PILT is not only an important element to county funding, 
the fact that it is indexed to inflation and is paid to 
counties for general purposes is critically important to 
retaining its character as a property tax payment. NACO 
believes this formula should retain its basic character.
    Some have suggested the consolidation of PILT with revenue 
sharing programs such as SRS. Comparing SRS and PILT is like 
comparing apples and oranges.
    The first being a revenue sharing program based on resource 
extraction, the latter being based on Federal land ownership 
and loss of property taxes to local governments. Any 
consolidation of these 2 or other would be disastrous to 
Federal land counties and ultimately politicize and otherwise 
apolitical and straight forward Federal program. While Congress 
make seek to fund both SRS and PILT on the same legislative 
vehicle, we would oppose any effort to consolidate PILT with 
natural resource based revenue sharing programs.
    NACO appreciates the opportunity to provide testimony 
before the committee. I look forward to working with members of 
the committee and staff to develop and pass legislation that 
will continue the historic partnership between Federal and 
county governments by extending continued mandatory funding for 
the Payment in Lieu of Taxes for Fiscal Year 2014 and beyond.
    This concludes my testimony. Be happy to answer any 
questions. Thank you.
    [The prepared statement of Mr. Yates follows:]

 Prepared Statement of Ryan R. Yates, Associate Legislative Director, 
    Legislative Affairs Department National Association of Counties

    Chairman Wyden, Ranking Member Murkowski, and members of the 
committee. Thank you for the opportunity to testify on behalf of the 
Nation's 3,069 counties, to provide insight on the Payment in Lieu of 
Taxes (PILT) program.
    For more than 30 years, the PILT program has provided payments to 
counties and other local governments to offset losses in tax revenues 
due to the presence of substantial acreage of federal land in their 
jurisdictions. Since local governments are unable to tax the property 
values or products derived from federal lands, these payments are 
essential to support essential government services (mandated by law) 
such as education, first responders, transportation infrastructure, law 
enforcement and healthcare in nearly 2,000 counties in 49 states, the 
District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands.
    This testimony will provide a historical overview of the PILT 
program, provide context to programmatic changes that (if enacted by 
Congress) could lead to a more equitable distribution of PILT funds, 
and lastly address the current funding situation and requirements for 
future payments.
            HISTORY
    In 1954, elected county officials from several western states 
joined together to develop a regional coalition of counties called the 
Interstate Association of Public Land Counties-an organization that 
would ultimately evolve into the Western Interstate Region of the 
National Association of Counties. The primary purpose of the 
organization was to educate policy makers in Washington, DC and 
advocate for Federal payments to counties in lieu of lost property tax 
revenue due to the presence of the vast Federal estate.
    The organization grew and incorporated membership from counties in 
the fifteen western states and enlisted support from other public land 
counties in other regions of the United States through what was then 
the National Association of County Officials. After several years of 
growing pressure from county officials nationwide, the 94th Congress 
passed the Payment in Lieu of Taxes Act (PL 94-565). The PILT Act was 
codified in Chapter 69 of Title 31 of the United State Code. Applicable 
regulations are in Subpart 1881, Title 43 of the Code of Federal 
Regulations.
    The impetus for its passage in 1976 was the passage of the Federal 
Land Policy and Management Act (FLPMA), which specifically established 
that disposal of public lands would largely cease. In lieu of a future 
in which lands could continue to pass from Federal ownership to private 
ownership (as provided through the Homestead Act), Congress opted to 
reimburse local governments for land that would remain in Federal 
ownership ``in lieu'' of paying direct property taxes.
    Congress established national formulas which took into account 
population, existing revenue-sharing payments for resources harvested 
or extracted from public lands, and base acreage of the Federal estate 
within the jurisdiction. With a few exceptions in New England and 
Wisconsin, states determined that counties were the jurisdictions that 
would receive payments.
    Local governments (usually counties) which provide services such as 
public safety, infrastructure, housing, social services and 
transportation and have non taxed federal land within their 
jurisdiction, are eligible for annual payments.
    Payments are made directly to the counties unless the state 
government concerned chooses to receive the payments and, in turn, pass 
the money on to other smaller governmental units such as a township or 
city. (Wisconsin is the only state currently employing this option)
    Historically, payments were limited to an amount appropriated by 
Congress. Initially authorized at $100,000,000, that amount was 
appropriated annually during the first decade of the Act. During the 
1980s there were attempts to zero out the amount in budgets, but 
Congress consistently restored the funds to the authorized level, such 
that the minimum amount was available each year.
    Following strong pressure from NACo and public lands counties 
nationwide, the Act was amended in 1994 to provide for a more equitable 
authorization level in light of disparities that existed between 
property values and current PILT payments. The law as amended, uses the 
consumer price index (CPI) to adjust the population limitation and the 
per acre dollar amounts used to calculate alternative ``A'' and ``B'' 
under Section 6902. However, an individual county's payment from one 
year to the next may not necessarily increase since the total amount of 
money available under the PILT program is set by Congress each year in 
the Department of the Interior and Related Agencies Appropriations 
Bill. Payments also vary with changes in ``prior year'' payments.
    From 1994 on, the authorized level and the appropriated level began 
to diverge, since the authorization crept up by an amount equal to the 
CPI each year, while appropriations stayed almost constant. Initial 
payments were set at $0.75/acre (Alternative A) and $0.10/acre 
(Alternative B).
    While most enabling acts set an authorized funding level, PILT is 
one of the few Federal programs which have no defined expiration and a 
``floating'' authorization-in which the authorized level flows directly 
from a summation of each county's indexed maximum payment level. Since 
the 1994 Act indexed individual payments, authorization levels have 
grown annually from roughly $100 million to over $393 million (FY2012).
    The table below shows the national levels of authorization and 
appropriation since 1981. There was a large increase in FY 2001, and 
steady increases until FY 2006. In FY 2008, the U.S. Department of the 
Interior (DOI) submitted two payments-the first payment in June was 
fixed at the FY 2007 level by Continuing Resolution (P.L. 110-5), less 
a 1.6 percent rescission. The second payment was paid following the 
signing of P.L. 110-343-which modified the PILT program from a 
discretionary program (subject to annual appropriations) to a fully 
funded mandatory entitlement program. PILT was fully funded from FY 
2008 to FY 2012.
      
    
    
            HOW ARE PAYMENTS CALCULATED
    Payments under each section of the Act are calculated as follows:
Section 6902 payments
Alternative A
    $2.47 (in fiscal year 2012) times the number of acres of qualified 
federal land in the county, reduced by the amount of funds received by 
the county in the prior fiscal year under certain other federal 
programs.

          ($2.47 X [number of acres of qualified federal land])-[prior 
        year funds received]

                                   or
Alternative B
    Thirty four cents (in fiscal year 2012) times the number of acres 
of qualified federal land in the county, with no deduction for prior 
year payments.
                  $0.34 x [number of qualified acres]
    Payments under either alternative are subject to population payment 
limitations.
Section 6904 and 6905 payments--
    Payments on Federal lands acquired after December 30, 1970 as 
additions to lands in the National Park System or National Forest 
Wilderness Areas (Section 6904) and payments on Federal lands in the 
Redwood National Park or lands acquired in the Lake Tahoe Basin near 
Lake Tahoe under the Act of December 23, 1980 (Section 6905) are 
computed by taking one percent of the fair market value of the 
purchased land and comparing the results to the amount of property 
taxes paid on the land in the year prior to federal acquisition. The 
payment to the county is the lesser of the two.
    Section 6904 Payments are made for a period of five years following 
each acquisition.
    Section 6905 Payments are made each year from the date the land was 
purchased by the federal government until an amount equal to 5 percent 
of the fair market value at the time of acquisition is fully paid. 
However, the yearly payment may not exceed the lesser of one percent of 
the fair market value or the property taxes assessed prior to federal 
acquisition.
            DEFINITIONS
Federal entitlement acreage
    All Federally held lands in all States, Commonwealths and 
Territories are counted with the exception of those lands that are part 
of Department of Defense installations and withdrawals. Nationally the 
following lands are counted:

          a. All land administered by the United States Forest Service
          b. All land administered by the National Park Service
          c. All land administered by the Bureau of Land Management
          d. All land withdrawn from public lands administered as part 
        of the National Wildlife Refuge System (acquired land is not 
        included)
          e. All dredge and flood control land administered by the 
        Corps of Engineers
          f. Project lands withdrawn and administered by the Bureau of 
        Reclamation
          g. Lands in Colorado acquired after Dec. 31, 1981 to expand 
        Ft. Carson
          h. Land on which are located semi-active or inactive Army 
        installations for ``use for mobilization and for reserve 
        component training''
          i. Land in Utah acquired for the inter-basin water transfer 
        (URC land) project

Prior Year Payments
    Prior year payments are payments to local governments under 
programs other than PILT during the previous fiscal year. These 
payments include those made under:

          a. the Refuge Revenue Sharing Fund,
          b. the National Forest Fund (``25% Fund'')
          c. the Taylor Grazing Act,
          d. the Mineral Leasing Act for acquired lands,
          e. the Federal Power Act,
          f. Titles I and III of the Secure Rural Schools and Community 
        Self-Determination Act.

    The PILT Act requires each state to report these payments to the 
U.S. Department of the Interior each year.
            DISBURSEMENTS
    In 2010, DOI announced a decision to delay the annual PILT 
payments. This decision caused widespread panic and confusion for 
counties nationwide as local governments have historically received 
annual PILT payments in June of each year and plan their budgets 
accordingly. The DOI last minute decision to delay payments without 
providing any notice was problematic, and placed countless public lands 
counties in difficult financial hardship.
    Many counties begin their fiscal year July 1 and rely on the June 
PILT payment to be available as net working capital available to the 
county general fund. For example, in the state of Oregon, property 
taxes are primarily received in November. The PILT payment being 
received in June allows for adequate operating funds to provide 
services to the community until the tax revenue flows again. In 
counties that are heavily encumbered by Federal lands, the PILT payment 
represents a sizeable percentage of the counties' beginning cash 
balance.
    Another problem created by the DOI decision to delay payments has 
to do with violating individual state budget laws. In a number of 
states, counties operate on a cash basis, which requires posting of 
revenue once it is received. In counties whose fiscal year ends June 
30, without the PILT payment, those counties could be in violation of 
state budget law.
    NACo and a bipartisan list of United States Senators and members of 
the House of Representatives requested that Interior Secretary Salazar 
take every effort to disburse payments to counties prior to June 30, 
2010 in order to avert substantial financial distress in public lands 
counties across the nation.
    Ultimately, the DOI resolved the problem in time and released the 
payments in late June, 2010. In light of the payment disbursement 
conflict, Senators John Ensign (R-NV), Tom Udall (D-NM), and Mark 
Begich (D-AK) introduced Payment in Lieu of Taxes Amendments Act of 
2010 (S. 3730). The legislation would require DOI to issue payments to 
counties not later than May 1 of each fiscal year. While the 
legislation was not enacted, the DOI received a very strong message 
from Congress and NACo that payments need to be made in a timely 
fashion.
            STATUS QUO
    On October 3, 2008, Congress enacted the Emergency Economic 
Stabilization Act of 2008 (PL 110-343) which authorized counties to 
receive their full PILT entitlement from FY 2008 through FY 2012. Until 
the passage of the EESA, appropriation levels had never reached 
authorized levels. Counties received payments totaling $393.4 million 
in FY 2012. Full mandatory funding for FY 2013 (minus a 5.1 percent 
sequestration cut) will be available for counties through the enactment 
of the Moving Ahead for Progress in the 21st Century Act (P.L. 112-141) 
last year.
    Currently, the Department of the Interior has one remaining payment 
that will be disbursed in June 2013. Congress will be required to act 
in order to maintain mandatory funding for fiscal years FY 2014 and 
beyond. Currently, no legislation has been introduced in the 113th 
Congress to provide continued funding for the PILT program. In the 
112th Congress, many members of the Senate Energy and Natural Resources 
Committee including Chairman Ron Wyden (D-OR) and Ranking Member Lisa 
Murkowski (R-AK) sponsored the County Payments Reauthorization Act of 
2011 (S. 1692) which would have provided secure mandatory funding for 
PILT through FY 2017. NACo appreciates the longstanding commitment from 
this Committee to the PILT program and commits to working with the 
Congress to achieve a multiyear commitment to full mandatory funding 
for PILT.
    Last week Senate Budget Committee Chairwoman Patty Murray (D-WA) 
made continued funding of the Payment in Lieu of Taxes (PILT) program 
and the reauthorization of the Secure Rural Schools and Community Self-
Determination Act a priority in the proposed committee budget for 
fiscal year 2014. The proposed budget resolution included a deficit 
neutral reserve fund for rural counties and schools to provide for the 
reauthorization of the Secure Rural Schools program and/or changes to 
the PILT program. The deficit neutral reserve fund language sets the 
stage for a much needed legislative solution to continue forest 
payments to counties and continued mandatory funding for PILT. Similar 
language had been included in House Budget Chairman Paul Ryan's (R-WI) 
budget proposal for FY 2012 and FY 2013, but was removed in the FY 2014 
request. The President has not yet released a budget proposal to 
Congress for FY 2014. The commitment from the Senate Budget Committee 
provides a great step forward toward securing the government's 
financial commitment to rural, public land counties.
            POTENTIAL MODIFICATIONS TO PILT
    NACo believes several policy modifications should be explored by 
Congress to identify ways to make payments to counties more equitable. 
A range of possible alternatives should be considered to more evenly 
distribute PILT funds to counties to provide greater budget certainty.
    Over time, some programmatic anomalies have become evident. Among 
these are the non-inclusion of Federal acquisitions, substantially 
reduced payments to jurisdictions with large Federal estates, and the 
inability of current formulas to account for externally induced costs 
resulting from Federal land use by persons originating from outside the 
jurisdiction.
    Counties have suggested the use of population caps (up to 50,000 
persons) may not be the most appropriate method for providing fair 
allocation. Depending on the current population of the county, the PILT 
payments are capped at pre-determined levels. The use of population 
caps fails to accurately demonstrate the actual population of people 
being serviced by the county any given day. For example, many counties 
with large acreages of federal land and small populations are gateway 
communities to recreation or heritage areas, national parks, and scenic 
areas. While increases in tourism and recreation can be beneficial to 
local economies--counties are burdened with the extra expense to law 
enforcement, infrastructure, search/rescue, and road maintenance 
budgets as visitor populations are not taken into consideration by the 
current PILT formulas. County governments are required by law to 
provide services to people--regardless of their place of residence.
    The 1994 Act primarily changed the method of establishing the 
annual authorization level, but left the basic distribution formulas 
intact. Revenue sharing programs identified as prior year payments do 
provide additional funding via revenue sharing to county governments, 
such as the Mineral Leasing Act and the Secure Rural Schools program. 
However, increases in these other payment programs have reduced the 
amount of PILT funding annually in many resource dependant counties. 
The federal government should not reduce its tax obligation to local 
governments, solely because of other land management revenue agreements 
between governments.
    An example of potential PILT formula inequities effects current 
legislation before this committee. Specifically, several Senate Energy 
and Natural Resources Committee members have cosponsored the Public 
Land Renewable Energy Development Act (S. 279). This legislation would 
establish a leasing and royalty system for renewable energy development 
on federal lands. Additionally, the legislation would share 25 percent 
of revenues with counties with developments in their jurisdictions. 
Under the current PILT formula, any new county revenues from 
alternative energy development on public lands would be deducted from 
the counties annual PILT payment--resulting in no net gain to the 
county.
    While some revenue sharing payments have diminished as Federal land 
use has shifted from revenue-producing use to public outdoor recreation 
use, such shifts have not only reduced or altered the inflow of revenue 
sharing; they have also created cost impacts to jurisdictions to 
provide services such as emergency search and rescue, law enforcement 
and increased road maintenance, among other impacts.
    PILT is not only an important element to county funding, the fact 
that it is indexed to inflation and is paid to counties for general 
purposes is critically important so as to assure it retains its 
character as a property tax payment and can be utilized for any general 
fund purpose. NACo believes the formula should retain this basic 
character. Counties with extensive Federal estates, however, receive 
lower PILT payments which neither reflect the local government costs 
resulting from that estate, or the payment is not fully reflective of 
the vastness of such estate within the jurisdiction.
    National formulas inadequately account for all the factors present. 
NACo has reviewed a number of possible formula changes, but as with any 
formula change--there can be ``winners and losers.'' We agree that PILT 
should count acres first and consider local population last, if at all. 
Equitable distributions can result through modifications to the current 
formula to reflect not only acreage and current revenue payments, but 
also other factors such as external use pressures that may be present 
within some of the jurisdictions.
            CONCLUSION
    While the United States Senate and the House of Representatives may 
approach legislative solutions for funding the PILT program 
differently, NACo will continue to urge leadership on both sides of the 
isle to act in a spirit of bipartisan and bicameral cooperation and 
work together to move a final legislative solution to the President's 
desk.
    NACo appreciates the opportunity to provide testimony before the 
Senate Energy & Natural Resources Committee. I look forward to working 
with members of the Committee to develop and pass legislation that will 
continue the historic partnership between Federal and county 
governments by extending continued mandatory funding for the Payment in 
Lieu of Taxes program for fiscal years 2014 and beyond.

    Senator Cantwell. Thank you, Mr. Yates.
    Mr. Haggerty, thank you very much for being here.Statement 
of Mark Haggerty, Policy Analyst at Headwaters Economics, 
Bozeman, MT

    STATEMENT OF MARK HAGGERTY, POLICY ANALYST, HEADWATERS 
                     ECONOMICS, BOZEMAN, MT

    Mr. Haggerty. Thank you, Chair Cantwell and Ranking Member 
Murkowski and members of the committee. I'm pleased to join you 
today to discuss Secure Rural Schools and PILT.
    I'm a policy analyst at Headwaters Economics, an 
independent research group based in Montana. We work with 
local, State and Federal Government to improve economic and 
community development decisions in the West. For a number of 
years my research has focused on the role of Federal county 
payments and rural economic development. I work closely with 
counties in collaborative groups across the West. I appreciate 
the important role that county payments play in supporting 
local government services in rural economies.
    With SRS already expired and funding for PILT in question 
there's a risk for counties in returning to a revenue sharing 
model with known problems. A revenue sharing approach would 
reduce payments overall and expose funding for basic government 
services to the tremendous volatility that has characterized 
timber markets since the late 1960s. Indeed as figure 1 in my 
written testimony shows, Congress has acted repeatedly to 
address the volatility and inequitable compensation inherent to 
revenue sharing programs.
    Today, Congress has an opportunity to extend funding with 
minor reforms and build toward a county payment program that 
provides stable and predictable payments, directs payments 
where they can have the most economic benefit and begins to 
lower the cost of the Federal taxpayer over time.
    One way these goals can be achieved is by combining SRS and 
revenue sharing payments with PILT into a single payment 
program. Such a program would maintain continuity with historic 
payments, retain the economic needs of adjustment in a SRS and 
direct a larger share of funding to rural communities.
    Let me briefly review the history that leads us to this 
point.
    Initially revenue sharing payments were quite small, but 
grew dramatically during the post World War II economic and 
housing boom. As Federal payments increased volatility became 
an important concern. Booms and busts in local and regional 
timber markets created uncertainty and generated pressure to 
maximize commercial returns.
    PILT, instituted in 1976 attempted to address volatility by 
using appropriations to shore up payments during times of 
commodity price contraction. Yet even with PILT in place total 
payments declined by 62 percent during the recession of the 
early 1980s.
    In 2000 SRS furthered a couple payments from commodity 
receipts to help stabilize payment levels. SRS also added an 
economics need component to the distribution formula in 2008 
addressing concerns about payment equity.
    If SRS is not reauthorized the decline in total funding 
will be felt most acutely in rural communities. Consider Dawson 
County, where I'm from, and I thank Senator Baucus in his 
introduction from recognizing Bozeman which is a small, 
prosperous, diverse city anchored by a thriving--by our public 
lands.
    If SRS goes away a $271,000 increase in PILT payments to 
Gallatin County will offset most of this loss. In contrast, 
Beaverhead County, Montana is a nearby ranching, timber and 
tourism dependent county with a small population and a budget 
more dependent on county payments. Beaverhead County will not 
be able to recoup $1.2 million in annual losses because of the 
population limit in the PILT formula. Without SRS rural 
counties across the U.S. stand to lose twice as much as 
metropolitan counties and will receive only about one-third of 
total payments.
    Continuing appropriations and single payment reforms can 
resolve these long standing challenges associated with 
volatility and reverse what may become an increasingly 
metropolitan program.
    This program would combine SRS and revenue sharing payments 
with PILT.
    It would provide stable and predictable payments by 
maintaining the decoupling between county distributions and the 
funding source.
    It would benefit rural communities by raising the 
population ceiling payment based on the acres of protected 
public lands and direct payments to counties that have the 
greatest economic needs.
    Map one in my written testimony shows how the single 
payment program would change the distribution payments for 
every county in the country if total funding for SRS and PILT 
together declined by 44 million from 2011 funding levels.
    I want to draw your attention to Central Idaho to show how 
the single payment approach could work.
    The Clearwater Basin Collaborative is a partnership with 21 
tribal, Federal, State, local, industry and conservation 
associations united by a shared vision, to enhance and protect 
the ecological and the economic health of the Clearwater Basin. 
A single PILT payment moves the goals of the collaborative 
forward in ways that the status quo cannot. Predictable and 
stable payments will support a consensus approach and allow 
greater flexibility in achieving multiple goals including 
greater predictability for timber, recreation, forest and 
watershed restoration and conservation.
    For the counties, knowing that they can support their rural 
schools and maintain roads is fundamental to retaining families 
and existing businesses and to start creating new jobs. In 
contrast returning to a revenue sharing model threatens to re-
entrench the battle lines over Federal management and re-expose 
counties to payment uncertainty.
    Thank you for your attention to this critical issue. I look 
forward to answering any questions you may have.
    [The prepared statement of Mr. Haggerty follows:]

    Prepared Statement of Mark Haggerty, Policy Analyst, Headwaters 
                         Economics, Bozeman, MT

    Thank you Chairman Wyden, Ranking Member Murkowski, and members of 
the Committee. I am pleased to join you today to discuss the Secure 
Rural Schools (SRS) and Payments in Lieu of Taxes (PILT) county 
payments programs. As a policy analyst at Headwaters Economics, I work 
closely with counties and collaborative groups across the West. I 
appreciate the important role county payments play in supporting local 
government services and rural economies.
    Headwaters Economics is an independent research group based in 
Montana that works with local, county, and state governments to improve 
economic and community development decisions in the West.
    For a number of years my research has focused on the role of 
federal county payments in rural economic development. We have 
developed white papers analyzing outcomes of different county payment 
scenarios based on current law and proposed policy options on a county-
by-county basis. Headwaters Economics also worked as a contractor to 
the the Forest Service and BLM to develop a free software tool (the 
Economic Profile System-Human Dimensions Toolkit) that generates county 
level reports on all federal land payment programs, including SRS and 
PILT. Please refer to the appendix for a summary of this work.
            The Opportunity to Reform County Payments
    With SRS already expired and funding for PILT in question, there is 
a risk for counties of returning to a revenue sharing model that has 
known problems. A revenue sharing approach would reduce overall 
payments to counties and also would expose funding for basic government 
services to the tremendous volatility that has characterized timber 
markets since the late 1960s. Indeed, the current PILT and SRS programs 
were developed to address the challenges inherent to a revenue sharing 
approach.
    Faced with the challenges, Congress has an opportunity today to 
implement minor reforms to create a county payment program that 
advances rural economic development, forest restoration, and 
conservation goals while avoiding the volatility risks associated with 
direct revenue sharing payments.

    Figure 1*. Key Developments in the History of County Payments
---------------------------------------------------------------------------
    * All figures and maps have been retained in committee files.

     Combining SRS and revenue sharing with PILT, and making small 
---------------------------------------------------------------------------
changes to the PILT formula, can achieve three critical goals:

          1. Provide fair, stable, and predictable payments to 
        counties.
          2. Target payments where they can have the most economic 
        benefit.
          3. Reduce costs to federal taxpayers.

    Let me first briefly review the history of county payments, 
summarized in Figure 1, which shows the fluctuating value of federal 
reimbursements to counties along with the dates of landmark reforms.
Congress Has Repeatedly Reformed County Payments to Respond to Changing 
        Needs
    These reforms, made by Congress to respond to changing economic and 
political conditions, demonstrate the long-term flexibility of the 
program. Today, with the SRS program expired and the need to re-
appropriate PILT after 2013, Congress again is poised to consider 
reforms to county payments that reflect changing budget realities and 
the fiscal and economic need of local governments with significant 
acres of public lands.
Payments Originally Linked to Commodity Receipts
    The policy origin of Forest Service payments to counties in 1908 is 
clear: as compensation for public ownership of the Forest Reserves, the 
federal government initiated payments to counties in lieu of paying 
property taxes.\1\ These payments were funded from commercial receipts 
generated on public lands, and counties could use the payments to fund 
roads and schools.\2\
---------------------------------------------------------------------------
    \1\ Act of May 23, 1908, Pub. L. No. 60-136 (the Twenty-Five 
Percent Payment).
    \2\  Federal legislation mandated payments fund county roads and 
schools, but left to states how to allocate these funds between these 
two services. See Congressional Research Service Memorandum, Forest 
Service Revenue-Sharing Payments: Distribution System. November 19, 
1999. Ross Gorte.
---------------------------------------------------------------------------
    In 1937, the Bureau of Land Management (BLM) began sharing 
commercial receipts generated on the Oregon and California Railroad 
Grant Lands (O&C) with counties and schools along the same model as the 
Forest Service.\3\
---------------------------------------------------------------------------
    \3\ The main difference is that the county government share of 
payments is not restricted to roads but can be used for any 
governmental purpose. See: O&C Lands Act, Pub. L. No. 74-405, tit. 
II(a) (1937).
---------------------------------------------------------------------------
    The value of initial Forest Service and BLM O&C revenue sharing 
payments was insignificant to most counties for the first 30 years.\4\ 
From 1908 to 1942, payments averaged less than $10 million nation-wide 
in real terms. After World War II, when commodities from the National 
Forests and BLM O&C lands helped to fuel the nation's housing boom, 
revenue sharing payments provided significant funding to counties. From 
1945 to 1980, payments averaged $391 million, reaching a high of $1.2 
billion in 1977.
---------------------------------------------------------------------------
    \4\ Revenue sharing payments are estimated from historic timber cut 
and sold reports from the Forest Service at the national level. Source: 
USDA Forest Service. All values in this paragraph are offered in real 
dollars.
---------------------------------------------------------------------------
Reforms Made to Address Volatility and Incentives Inherent to Commodity 
        Payments
    After WWII, many counties, particularly in the Pacific Northwest, 
grew to depend on timber for jobs and income, and payments to counties 
supported significant portions of local school and county budgets. As 
payments became more important, the use of commodity receipts as a 
funding source started to show several weaknesses.
    Volatility in commodity extraction in the 1960s and 1970s made it 
difficult for local government to plan for and provide quality public 
services consistently on an annual basis. In 1970, the U.S. Public 
Lands Law Review Commission wrote: ``Although they were originally 
designed to offset the tax immunity of Federal Lands, the existing 
revenue-sharing programs do not meet a standard of equity and fair 
treatment either to state and local governments or to the Federal 
taxpayers.''\5\
---------------------------------------------------------------------------
    \5\ United States Public Land Law Review Commission. 1970. ``One 
third of the Nation's land: a report to the President and to the 
Congress.'' Washington, D.C.:273
---------------------------------------------------------------------------
    The report added that payments based on commercial activities 
created perverse incentives for counties such that ``pressures can be 
generated to institute programs that will produce revenue, though such 
programs might be in conflict with good conservation practices.''\6\ By 
conservation practices the authors meant the sustainable use of public 
land resources for commercial activities and environmental conservation 
including new national parks or other land designations that 
potentially limit revenue sharing payments.
---------------------------------------------------------------------------
    \6\ Ibid.
---------------------------------------------------------------------------
    Concerns about stability and predictability eventually led 
Congress, in 1976, to pass Payments in Lieu of Taxes (PILT) in addition 
to the existing revenue sharing payments.
    PILT interacts with Forest Service revenue sharing payments as a 
shock absorber. When revenue sharing payments decline, counties are 
eligible for larger PILT payments. When revenue sharing payments rise 
during boom years, the PILT formula responds with lower 
appropriations.\7\
---------------------------------------------------------------------------
    \7\ Schuster, Ervin G. 1995. ``PILT--its purpose and performance.'' 
Journal of Forestry. 93(8):31-35 and Corn, M. Lynne. 2008. PILT 
(Payments in Lieu of Taxes): Somewhat Simplified. Congressional 
Research Service (CRS) Report RL-31392.
---------------------------------------------------------------------------
    Yet even with PILT in place, total payments declined by 62 percent 
during the recession of the early 1980s.
Payments Have Been Decoupled from Commodity Receipts
    More recently, changing economic conditions along with new goals 
for public land management slowed the pace of logging on federal land, 
lowering revenue sharing payments to counties by more than 90 percent 
in some areas.\8\ The Northwest Forest Plan that set new management 
goals for forests in the Pacific Northwest included the first 
``transition payments'' to counties-a recognition that changing 
management goals that reduce resource extraction also reduce local 
government payments. The so-called ``spotted owl'' payments decoupled 
the link between extraction and county compensation by guaranteeing a 
stable, albeit declining, annual payment funded by federal 
appropriations.
---------------------------------------------------------------------------
    \8\ Gorte, Ross W. Reauthorizing the Secure Rural Schools and 
Community Self-Determination Act of 2000.Congressional Research Service 
(CRS-R41303). June 2010. Washington, D.C.
---------------------------------------------------------------------------
    The decline in timber receipts felt most acutely in the Pacific 
Northwest was also occurring across the rest of the National Forests. 
In 2000, Congress passed the Secure Rural Schools and Community Self-
Determination Act (SRS) that effectively extended transition payments 
to the rest of the country.\9\ Initially authorized for six years, SRS 
provided optional payments equal to 85 percent of the highest three 
years of revenue sharing payments between 1986 and 1999.\10\
---------------------------------------------------------------------------
    \9\ Secure Rural Schools and Community Self-Determination Act of 
2000, Pub. L. No. 106-393. Payment information is available from the 
Forest Service website at http://www.fs.fed.us/srs/ (last accessed 11/
22/10).
    \10\ Under Section 102(a) and 103(a), states eligible to receive 
Forest Service and/or BLM revenue sharing payments can elect to receive 
either (1) the Twenty-Five Percent (Forest Service) or Fifty Percent 
(BLM) Payment or (2) the ``full payment amount,'' calculated as the 
average of the three highest yearly revenue sharing payments from FY 
1986 to FY 1999. The SRS payment was tied to the average of the three 
highest historical payments to each state as a means of further 
reducing the volatility of timber receipts at the county level. Under 
the 2000 version of the SRS Act, funding for payments to states and 
counties is derived from revenues, fees, penalties, or miscellaneous 
receipts received by the federal government from activities of the 
Forest Service on National Forest land, and the Bureau of Land 
Management on revested and reconveyed grant lands (lands returned to 
federal ownership). Pub. L. No. 106-393, Sec. Sec.  102(b)(3), 
103(b)(2). To the extent of any shortfall, payments are derived from 
Treasury funds not otherwise appropriated.
---------------------------------------------------------------------------
    In SRS, Congress ended the reliance of most counties on commodity 
receipt-based payments that were unlikely to return to historic highs. 
Decoupling payments from commodity receipts reduced the importance of 
producing commodities in order to generate revenue for county payments. 
It also opened the possibility for new collaborative efforts to address 
restoration, stewardship, and conservation goals on public lands.
SRS Promoted Economic Diversification and Reflected Costs Associated 
        with Public Lands
    In Title II and Title III of SRS, Congress introduced new purposes 
to the county payments program. Title II provided public land managers 
and communities with limited but important resources for collaboration 
and on-the-ground work such as stewardship and restoration projects 
that create jobs and improve forest health (counties that receive more 
than $100,000 from SRS must allocate 15-to-20 percent between Title II 
and Title III).
    Title II dollars are retained by the federal government and spent 
on public lands activities following the recommendations of Resource 
Advisory Committees (RACs). Title II could fund infrastructure, 
restoration, stewardship, and other projects on public lands. Title II 
was the first time the county payments program set aside funding for 
the direct purpose of creating economic opportunities in counties that 
have public lands. The funds were also used to improve forest health, 
aiding in transitioning counties away from dependence on commodities by 
creating new jobs in restoration and forest stewardship.
    Title III of SRS represented another important reform: it made 
explicit for the first time the links between federal lands and the 
direct demands those lands create for county emergency services and 
wildland fire safety. Title III funds could be used on special county 
projects including reimbursement for emergency services provided on 
federal lands and funding for community fire plans and fire-wise 
activities.
    The abnormally harsh fire season in 2000, described at the time as 
the worst fire season in the United States since 1910, likely 
influenced Congress to include funding for wildfire preparedness in 
Title III.\11\ Whereas the 2000 legislation provided funding for 
projects in six broad areas, subsequent reauthorizations limited 
funding to projects in three specific areas, two concerned with 
wildfire preparedness and the third funding emergency services and 
search and rescue activities on public lands.
---------------------------------------------------------------------------
    \11\ U.S. Fire Administration, 2000 Wildland Fire Season, http://
www.usfa.dhs.gov/downloads/pdf/tfrs/v1i2-508.pdf (last accessed 3/16/
2010).
---------------------------------------------------------------------------
SRS Reforms in 2008 Adjusted Payments Based on Economic Need
    Congress made other important reforms in 2008 to adjust the SRS 
distribution formula based on the per-capita personal income in each 
eligible county. The goal was to direct relatively higher payments to 
counties with low per-capita personal income. Reforming the 
distribution formula based on economic need reflected a desire to make 
payments to counties that need them most.
    Two other mechanisms were incorporated into the 2008 
reauthorization to achieve a more equitable distribution of payments 
nation-wide, based on more general concerns about the distribution of 
payments. The SRS ``base share'' formula was reformed to include the 
total acres of federal lands along with historic revenue sharing 
payments, and certain ``covered states'' (California, Louisiana, 
Oregon, Pennsylvania, South Carolina, South Dakota, Texas and 
Washington) were given ``transition payments'' pegged to the sums paid 
to states and counties in 2006 under the SRS Act as then 
implemented.\12\
---------------------------------------------------------------------------
    \12\ U.S. Forest Service, Title I-Secure Payments for State and 
Counties Containing Federal Land. Pub. L. No. 110-343, tit.VI, Sec.  
103. http://www.fs.fed.us/srs/Title-I.shtml (last accessed 11/22/10).
---------------------------------------------------------------------------
    The 2008 reauthorization of SRS provided a significant temporary 
increase in transition funding, making payments close to historic highs 
(on a national level, only payments in the years 1977 to 1980 exceeded 
the FY 2008 payment levels in real terms). In essence, the two latter 
reforms (not based on economic need) had the effect of distributing the 
increased appropriation more broadly to all states eligible to receive 
payments.\13\
---------------------------------------------------------------------------
    \13\ It is unclear from the legislative history why certain states 
were selected to be ``covered states,'' but concerns over equitable 
distribution of payments likely played a role in California, Oregon, 
and Washington being included. A political motivation also lay behind 
expanding the number of states receiving higher SRS payments as it may 
increase the likelihood of future authorizations.
---------------------------------------------------------------------------
    SRS accomplished more equitable distribution through adjustments to 
the formula.\14\ SRS payments were based on three factors: a base 
payment considering 1) historic timber receipts and 2) acres of Forest 
Service and BLM land which is 3) adjusted by per capita personal 
income.
---------------------------------------------------------------------------
    \14\ The existing SRS formula is described in an eight-page 
technical document, ``Calculating Payments,'' available on the Secure 
Rural Schools website: http://www.fs.fed.us/srs/docs/calculations.pdf 
(last accessed 11/22/10). Each county's payment was based partially on 
historic timber receipts and partially on the number of acres of 
federal land within the county's boundaries. A county's payment was 
also dependent on how many of their peers opted into the SRS payment 
formula. The fewer counties that elected to receive SRS payments 
(opting to receive their revenue sharing payment instead), the higher 
the SRS payment to each county was, and vice-versa.
---------------------------------------------------------------------------

     County Payment = Base Payment / Per Capita Income Adjustment.

    The pressing issues associated with SRS's expiration are continued 
volatility, decreased total revenue, and a return to an inefficient, 
inequitable distribution of payments.
Continued Volatility
    The recent national recession made it clear that the boom and bust 
nature of commodity markets persists and can be especially damaging in 
resource-dependent counties in the West. Headwaters Economics recently 
analyzed all 413 counties of the 11 contiguous western states in the 
context of the recent recession, and looked at how this economic 
downturn varied from earlier business cycles.\15\
---------------------------------------------------------------------------
    \15\ Patricia H. Gude, Ray Rasker, Kingsford L. Jones, Julia H. 
Haggerty, Mark C. Greenwood. 2012. The Recession and the New Economy of 
the West: The Familiar Boom and Bust Cycle? In press in the Journal of 
Growth and Change. http://headwaterseconomics.org/wphw/wp-content/
uploads/Western_Counties_Recession_Paper.pdf.
---------------------------------------------------------------------------
    Four critical findings from this analysis about economic 
performance during the recession are:

          1. The faster a county's population grew from 2000 to 2007, 
        on average, the faster the area tended to lose jobs during the 
        recession.
          2. Counties that were more timber-dependent tended to lose 
        jobs at a faster rate during the recession.
          3. On average, counties with higher education rates (based on 
        the percent of adults with a college degree) experienced lower 
        rates of job loss.
          4. Higher government employment was also associated with 
        lower rates of job loss.

    The study results underscore important tenets of economic 
development in a modern economy such as the importance of education in 
the emerging global economy and the stabilizing effect of government 
employment during economic contraction. Of particular relevance to the 
topic of county payments from federal lands is the danger of over-
reliance on single sectors, in particular those that fluctuate with 
commodity markets, such as the timber industry.
    Timber-dependent counties received SRS and PILT payments during the 
recession which helped stabilize county finances. These already 
vulnerable county economies could have faced even greater challenges if 
their payments were dependent on low commodity prices, as would be the 
case in the absence of some form of SRS reauthorization.
    Exposure to boom-bust commodity cycles is a constant hazard for 
remote rural counties in the West. By reforming county payment programs 
to focus on the long-term security of funding for basic government 
services, Congress can help create a buffer against this hazard.
Inequitable Distribution For Rural Counties
    If SRS is not reauthorized, the decline in total funding will be 
felt most acutely in rural communities. Consider Gallatin County, 
Montana, where I live, which has a prosperous diverse economy anchored 
by the thriving city of Bozeman. If SRS goes away, a $271,000 increase 
in PILT payments will offset most of this loss. In contrast, Beaverhead 
County, Montana, is a nearby ranching, timber, and tourism-dependent 
county with a small population and a budget more dependent on county 
payments. Beaverhead County will not be able to recoup $1.2 million 
losses because of the population limit in the PILT formula.
    The PILT formula places an upper limit on the total payment each 
county can receive based on the county's population. The population 
limit effectively limits the amount any one county can receive, and 
lowers the potential cost to the federal treasury if revenue sharing 
payments decline precipitously.
    If SRS is not reauthorized, two things will occur. The reforms in 
SRS that provided for a more equitable distribution of payments based 
on per capita personal income will be lost. Moreover, utilizing PILT 
only will mean that rural places will experience a disproportionate 
share of payment losses. Across the U.S., rural counties stand to lose 
twice as much as metropolitan counties and will receive only about one-
third of payments if SRS is not reauthorized.
Single Payment Model Creates Security, Equity, and Efficiency
    Here is how a single payment idea could help resolve long-standing 
challenges:

          1. Combine SRS and revenue sharing payments into a new PILT 
        formula.
          2. Provide stable and predictable payments by maintaining the 
        decoupling between county distributions and the funding source.
          3. Benefit rural counties by raising the population cap based 
        on acres of protected public lands.
          4. Target payments to counties that have the greatest 
        economic needs.

    Table 1 compares the single payment proposal with current and 
estimated payments. The single payment proposal reflects the new PILT 
formula and a reduction of about $45 million from FY 2011 payment 
amounts.
      
    
    
    Map 1* in the appendix shows how county-by-county distributions of 
a single payment change from FY 2011 payment distributions. For 
example, payments are shifted away from metropolitan areas, including 
the Puget Sound metropolitan region in Washington, the Wasatch Front in 
Utah, and Phoenix and Tucson in Arizona to rural areas in central 
Idaho, southern Utah, and coastal Oregon, among others.
---------------------------------------------------------------------------
    * The map has been retained in committee file.
---------------------------------------------------------------------------
*Increasing the Population Limit
    Increasing the population limit for rural counties offers a 
mechanism for reversing the shift of payments from rural to urban 
counties as total payments decline. Raising the population limit allows 
rural counties to receive a larger share of appropriated dollars at any 
given funding level.
    Under the current PILT formula, each county's PILT payment is equal 
to the number of eligible acres in each county times an entitlement 
amount of $2.47 in FY 2012. This combined value is then compared to the 
population ceiling limitation amount, and the final PILT payment is the 
lesser of the two.
    The single payment proposal raises the population ceiling 
limitation, but not the entitlement amount, for each county. The 
ceiling is raised by an amount equal to the number of acres of 
protected public lands in each county times the entitlement amount of 
$2.47 in FY 2012.\16\
---------------------------------------------------------------------------
    \16\ We utilized a list of protected lands as defined in the EPS-
HDT software as ``Type A'' lands. These include: National Parks and 
Preserves (NPS), Wilderness (NPS, FWS, FS, BLM), National Conservation 
Areas (BLM), National Monuments (NPS, FS, BLM), National Recreation 
Areas (NPS, FS, BLM), National Wild and Scenic Rivers (NPS, FS, BLM), 
Waterfowl Production Areas (FWS), Wildlife Management Areas (FWS), 
Research Natural Areas (FS, BLM), Areas of Critical Environmental 
Concern (BLM), and National Wildlife Refuges (FWS). See http://
headwaterseconomics.org/tools/eps-hdt.
---------------------------------------------------------------------------
    Raising the population ceiling limit increases payments only for 
counties where such limits currently apply. As a result, a larger share 
of payments will go to rural counties that have protected public 
lands.\17\
---------------------------------------------------------------------------
    \17\  PILT currently authorizes higher payments for newly acquired 
Wilderness and National Park acres for a period of five years. The 
additional payment covers lands acquired by the federal government to 
be included in the National Park system or as national forest 
Wilderness. The law states that ``The Interior Secretary shall make 
payments only for the five fiscal years after the fiscal year in which 
the interest in land is acquired. Under guidelines the Secretary 
prescribes, the unit of general local government receiving the payment 
from the Secretary shall distribute payments proportionally to units 
and school districts that lost real property taxes because of the 
acquisition of the interest. A unit receiving a distribution may use a 
payment for any governmental purpose.'' P.L. 97-258, as amended Section 
6904. Additional Payments.
---------------------------------------------------------------------------
Economic Performance Adjustment
    The SRS formula contained an ``income adjustment'' based on per 
capita personal income. Counties with relatively lower levels of income 
received a larger share of the total appropriated amount. By 
comparison, counties with relatively higher levels of income would 
receive lower payments.
    The single payment idea retains the adjustment to ensure equity of 
payments and to lower total appropriations by directing payments to 
those counties that need them most.
    While the past SRS formula used just one measure of economic 
performance, we recommend using a set of five variables: percentage of 
households below poverty,\18\ median household income,\19\ average 
earnings per job,\20\ percentage of the workforce with a bachelor's 
degree or higher\21\ and county typology (on a continuum: metro, metro 
outlying, micro, micro outlying, and rural).\22\
---------------------------------------------------------------------------
    \18\ The term poverty, as used by the U.S. Census Bureau, is 
defined at: http://factfinder.census.gov/servlet/ 
MetadataBrowserServlet? type=subject&id= POVERTYSF3& 
dsspName=DEC_2000_SF3&back= update&_lang=en (last accessed 9/9/10).
    \19\ For the full definition of Median Household Income, see the 
U.S. Bureau of the Census: http://factfinder.census.gov/home/en/epss/
glossary_i.html#income (last accessed 9/9/10).
    \20\ For the full definition of Average Earnings per Job, see the 
Bureau of Economic Analysis, U.S. Department of Commerce: http://
www.bea.gov/regional/definitions/ (last accessed 9/9/10).
    \21\ Education is one of the most important indicators of the 
potential for economic success, and lack of education is closely linked 
to poverty. Studies show that areas whose workforce has a higher-than-
average education level grow faster, have higher incomes, and suffer 
less during economic downturns than other regions. Education rates make 
a difference in earnings and unemployment rates. In 2009, the average 
weekly earnings for someone with a bachelor's degree was $1,025, 
compared to $626 per week for someone with a high school diploma. While 
in 2009 the unemployment rate among college graduates was 5.2 percent, 
for high school graduates it was 9.7 percent. For information on the 
relationship between level of education, earnings, year-round 
employment, and unemployment rates, see: U.S. Census Bureau's 2002 
publication ``The Big Payoff: Educational Attainment and Synthetic 
Estimates of Work-Life Earnings.'' http://www.census.gov/prod/2002pubs/
p23-210.pdf (last accessed 9/9/10). The wage and unemployment effects 
of education are available from the Bureau of Labor Statistics: http://
www.bls.gov/emp/ep--chart--001.htm (last accessed 10/23/10).
    \22\ Definitions of county typologies can be found at the U.S. 
Census Bureau.http://www.census.gov/population/www/metroareas/
metroarea.html (last accessed 9/9/10).
---------------------------------------------------------------------------
    These metrics used to assess economic need are widely utilized and 
well understood. Map 2 in the appendix shows the relative economic 
performance of counties using these measures from best (light blue) to 
worst (dark blue).
    During the last 30 years many rural counties have experienced a 
dramatic shift in their economies. Counties have diversified into more 
service-related occupations while commodity-related sectors have 
contributed less than three percent of total new jobs from 1990 to 
2008.\23\
---------------------------------------------------------------------------
    \23\ U.S. Department of Commerce. 2010. Bureau of Economic 
Analysis, Regional Economic Information System, Washington, D.C.
---------------------------------------------------------------------------
    Not all public lands counties, however, have been able to create a 
diverse, robust, and resilient economy with a healthy tax base. 
Poverty, low-paying jobs, lack of education, isolation from markets, 
and difficulties competing in expanding service industries are 
persistent challenges for some counties.
    Favoring the neediest counties for relatively higher county 
payments is consistent with the original goal of SRS to help counties 
diversify economically and to provide equity in payments to counties 
and for federal taxpayers.\24\
---------------------------------------------------------------------------
    \24\ The States of Oregon, Washington, and California received the 
lion's share of the approximately $2.7 billion of funding distributed 
under Titles I, II and III of the SRS Act between 2000 and 2007. Oregon 
received by far the largest share, with $1.2 billion, while California 
and Washington received $473 million and $322 million respectively. 
From one perspective, this result was exactly as it should have been. 
SRS was initially passed to make up for lost timber receipts, and so it 
was only appropriate that the Pacific Northwest, historically a great 
timber producing region, benefitted disproportionately. States that did 
not have historically high timber harvesting levels were understandably 
less enthusiastic. The Bush Administration favored revising the funding 
formula to take stock of current economic conditions. Mark Rey, Under 
Secretary of Natural Resources for the Department of Agriculture, 
testified ``Many now largely urban or suburban counties in the west are 
getting a substantial amount of money . . . because the formula was a 
reflection of the historical timber receipts that those counties 
enjoyed . . . at an earlier time. Many of those counties . . . are 
pretty vibrant right now.'' The Administration felt that urbanized 
areas that could generate funds from traditional municipal revenue 
sources ought to do so, rather than rely on federal handouts. As a 
result, the distribution formula was changed in 2008 so that other 
states realize a more substantial benefit from it. Secure Rural Schools 
and Community Self-Determination Reauthorization Act of 2007: Hearing 
on S. 380 Before the Subcommittee on Public Lands and Forests, 
Committee on Energy and Natural Resources, 110th Cong. 1 (2007).
---------------------------------------------------------------------------
    By adjusting the single payment formula to give preferential 
treatment to the neediest counties, the federal payments will serve an 
important goal of economic development, job creation, and poverty 
alleviation. In addition, using a broader and improved set of criteria 
to link payments to economic performance and opportunity has the 
advantage of more efficiently targeting payments to those counties that 
need payments the most.
Benefits for Counties and Rural Economies
    I want to draw your attention to Idaho to show how a single payment 
model could support ongoing collaborative resource management and 
economic development efforts.
    Founded in 2008, the Clearwater Basin Collaborative (CBC) is an 
innovative partnership of twenty-one tribal, federal, state, local, 
industry, and conservation associations in central Idaho united by a 
shared vision: ``to enhance and protect the ecological and economic 
health of the forests, rivers, and communities within the Clearwater 
Basin.'' The CBC seeks to develop resource management priorities 
collaboratively among historically often conflicted parties, finding 
solutions that take all stakeholders' interests into account.
    Diverse stakeholder interests include creating predictability for 
commercial timber supply, improving recreation access, and 
accomplishing forest restoration and conservation goals, all across a 
large landscape. The CBC is a progressive approach to creating 
solutions to conflicts. This is the kind of approach that could be 
thwarted in the absence of effective reforms to the county payments 
programs.
    The (CBC) has considered alternatives to SRS. Analysis of proposals 
that rely on commodity extraction as the main source of revenue-and as 
the main purpose of public lands management-suggest this approach will 
not provide predictable or sufficient payments to area counties and 
schools. Current proposals to return to a revenue sharing model and 
transfer federal public land management to the states clearly threaten 
to alienate some CBC stakeholders.
    If SRS is not reauthorized, Idaho and Clearwater counties will 
receive $6 million less annually than they did in FY 2011. In contract, 
the single payment proposal would allow the two counties to retain 
similar or higher payments compared to 2011 levels, even with lower 
appropriations.
    Equally important, a single PILT payment moves the goals of the CBC 
forward in ways that the status quo cannot. The new single payment 
formula supports a consensus approach to solving shared goals with 
stronger outcomes for local economies and forest health. In contrast, 
returning to a revenue sharing model would re-entrench the battle lines 
over federal management and re-expose counties to payment uncertainty.
Conclusion
    For these reasons, we see a critical role for continued 
appropriations as part of future federal payments to counties. The 
uncertainty and decreased funding levels that accompany a return to 
revenue sharing are not desirable. The history of the program shows 
that revenue sharing will work only for a handful of counties 
nationally, and even then will fail to provide certainty year over 
year.
    By comparison, receipts will rise and economic development 
opportunities will be greatest where payment certainty is provided. 
Local and regional efforts to create jobs and improve forest health 
will succeed if all sides have greater certainty: certainty and 
fairness for counties; certainty for industry of increased supply; and 
certainty for conservation interests for continued restoration and 
protections, among others.
    Maintaining decoupling between the size and relative distribution 
of payments and the source of revenue creates a framework that can 
accommodate new dedicated funding streams from public lands. This basic 
arrangement provides a path to reducing the need for federal 
appropriations over rising payments over time, buffered from the booms 
and busts in commodity markets. It also allows new revenue to come from 
anywhere, and ideas range from higher oil and gas royalties, to new 
leasing fees, to a carbon tax.
    Thank you for your attention to this issue.

    Senator Cantwell. Thank you, Mr. Haggerty. Yes, we will 
have questions. But let's hear from Dr. O'Laughlin, our last 
witness, and then we'll go to questions.
    Thank you.

  STATEMENT OF JAY O'LAUGHLIN, PROFESSOR OF FORESTRY & POLICY 
   SCIENCES, AND DIRECTOR, POLICY ANALYSIS GROUP, COLLEGE OF 
       NATURAL RESOURCES, UNIVERSITY OF IDAHO, MOSCOW, ID

    Mr. O'Laughlin. Thank you, Chair Cantwell, Ranking Member 
Murkowski and members of the committee.
    My name is Jay O'Laughlin. I'm a Professor of Forestry and 
Policy Sciences at the University of Idaho. For 23 years, full 
time Director of a Policy Analysis Research Unit created by the 
Idaho legislature.
    Senator Risch, thank you for your leadership back then.
    For 80 years counties received 25 percent of revenues from 
Federal lands primarily timber sales. But since 1990 timber 
sales have declined substantially by more than 90 percent in 
some areas. There are good reasons to rejuvenate a Federal 
timber sale program. Revenue sharing with counties is just one 
of them.
    My main point here is the triple win from forest 
management.
    First, improve forest conditions, especially sorely needed 
wildfire resiliency.
    Second, consumer products made from wood and its byproducts 
including renewable energy feed stocks for the full range of 
applications. Biomass thermal, we heat our campus with sawmill 
residues. Biopower and biofuels, wood products and energy 
byproducts help make our nation more self-reliant.
    Third, jobs in rural communities.
    Some Westerners are so dissatisfied with the current 
situation that they're calling for changing ownership of some 
Federal lands. But I want to talk about changing the rules, not 
changing ownership.
    Three ideas for generating more revenue than the current 
system does are No. 1, rejuvenating the Federal timber sale 
program.
    No. 2, creating a property tax equivalency system.
    No. 3, testing the trust land management model with pilot 
projects.
    No. 1, the timber sale program. The Forest Service believes 
that at least 65 million acres of its lands could be improved 
with restoration treatments including 12 million acres that 
need to be thinned with logging equipment before fire can be 
safely restored. The Forest Service is mechanically treating 
about 200,000 acres per year and from that providing about 2.5 
billion board feet per year.
    Rejuvenating the Federal timber sale program is the path to 
the triple win. Some analysts believe that the 1980s level of 
12 billion board feet per year is sustainable. Instead, I 
suggest harvesting half of that which is the current allowable 
sale quantity total of 6 billion board feet per year.
    But price is as important as quantity. Lots of 
administrative rules affect markets and prices. If sold at 
prices the States of Washington and Idaho get for their trust 
land timber sales the 25 percent share for counties would match 
Secure Rural Schools act payments.
    No. 2, property tax equivalency system. This would make 
Federal payments to counties equivalent to property taxes as if 
the land were privately owned. This approach may be difficult 
to design and implement, but each of the States has been doing 
this for a long time and fairness issues can be worked out.
    Third, trust land management. School trust lands were 
granted from the public domain at statehood. That's part of a 
bargain that the States would not tax the Federal lands within 
their boundaries. States were to generate revenues to support 
public schools either by selling the lands or retaining 
ownership and selling commodities from the land, like timber, 
forage and minerals.
    Trusts work. In the contiguous 48 States, 45 million acres 
of land grants are managed as trusts. They provide billions of 
dollars for education and other public purposes. The trust land 
management model is flexible. It could be adapted to limit land 
sales and adapted to include our RAC like local advisory 
committee to work with the trust land managers and to make 
biological diversity one of the trust missions. It could be 
organized to provide moneys for that purpose.
    In conclusion trust land management is our oldest and most 
durable resource management model. It is worth testing in 
several different national forests in order to properly gauge 
the magnitude of the triple win from actively managing public 
forests under a different organizational structure.
    Thank you for this opportunity. I look forward to 
questions.
    [The prepared statement of Mr. O'Laughlin follows:]

 Prepared Statement of Jay O'Laughlin, Professor of Forestry & Policy 
   Sciences, and Director, Policy Analysis Group, College of Natural 
               Resources, University of Idaho, Moscow, ID

                              INTRODUCTION

    Chairman Wyden, Ranking Member Murkowski, members of the committee 
and staff, it is a great honor to be here today. My name is Jay 
O'Laughlin. I live in Moscow, Idaho, where I am professor of forestry & 
policy sciences at the University of Idaho and for 23 years, full-time 
director of a policy analysis research unit created by the Idaho 
Legislature in 1989 and continuously funded since then. Our mandate is 
to provide objective analysis of resource and land-use issues Idahoans 
care about. We care about the federal lands that make up almost 64 
percent of the state's land base, a percentage exceeded only by Nevada 
and Utah. Almost 39 percent of Idaho is in the National Forest System; 
Oregon at 25 percent ranks a distant second.
    Congress enacted the Secure Rural Schools and Community Self-
Determination Act of 2000 (SRS) as a temporary, optional program of 
payments based on historic revenues.\1\ These payments compensate 
counties for the tax-exempt status of federal lands, following a policy 
dating to 1906 that counties receive a percentage of agency revenues, 
primarily from timber sales. Since 1989, however, timber sales have 
declined substantially, by more than 90 percent in some areas.\2\ On an 
annual payment basis, Oregon benefits the most from SRS, followed by 
California, then Washington and Idaho, with Montana not far behind.\3\ 
Based on the percent of the county revenue for schools and roads that 
comes from federal payments, many counties in Idaho, Montana, New 
Mexico, and Oregon depend heavily on these payments.\4\
---------------------------------------------------------------------------
    \1\  P.L. 106-393, 114 Stat. 1607 (October 30, 2000). http://
www.fs.usda.gov/Internet/FSE--DOCUMENTS/stelprdb5260244.pdf
    \2\ Gorte, R.W. (2010). Reauthorizing the Secure Rural Schools and 
Community Self-Determination Act of 2000. Congressional Research 
Service Report CR41303, Washington, D.C. 14 pp
    \3\ Id
    \4\ Headwaters Economics (2010). County Payments, Jobs, and Forest 
Health: Ideas for Reforming the Secure Rural Schools and Community 
Self-Determination Act (SRS) and Payments in Lieu of Taxes (PILT). 
Headwaters Economics, Bozeman, MT. 96 pp. http://
headwaterseconomics.org/wphw/wp-content/uploads/
Reform_County_Payments_WhitePaper_LowRes.pdf
---------------------------------------------------------------------------
    According to the U.S. Forest Service, the condition of at least 65 
million acres of National Forest System lands could be improved with 
restoration treatments.\5\ The removed woody biomass can be 
manufactured into useful consumer products and the residuals used to 
produce energy. It takes people to do this work so in turn forest 
restoration helps revitalize our rural communities.
---------------------------------------------------------------------------
    \5\  U.S. Forest Service (2012). Increasing the Pace of Restoration 
and Job Creation on Our National Forests. Unnumbered publication, 
Washington, DC. 8 pp. http://www.fs.fed.us/publications/restoration/
restoration.pdf
---------------------------------------------------------------------------
    My main point is that active forest restoration results in a 
triple-win: first, improved conditions, including wildfire resiliency; 
second, consumer products and energy feedstocks, both helping make our 
nation more self-reliant; and third, jobs in rural communities. The 
triple win is related to the county payments programs because a 
meaningful federal timber sale program with a continued revenue-sharing 
policy would greatly reduce the need for federal land payments.
    In 2011, I was asked by the University's Research Office to respond 
to a query from one of our two members of the U.S. House of 
Representatives (Ra#l Labrador) for information about the Secure Rural 
Schools Act and the trust land management model used to manage school 
trust lands granted to Idaho, and many other states, to support public 
education. These were not new issues for me,\6\ so I assembled an Issue 
Brief report for the congressman's staff and walked them through it.\7\ 
Updated and more detailed portions of it follow.
---------------------------------------------------------------------------
    \6\ O'Laughlin, J., W.R. Hundrup & P.S. Cook. (1998). History and 
Analysis of Federally Administered Lands in Idaho. PAG Report 16, 
University of Idaho, Moscow, 125 pp. http://www.uidaho.edu//media/
Files/orgs/CNR/PAG/Reports/PAGReport16
    \7\ O'Laughlin, J. (2011). Secure Rural Schools Program 
Reauthorization, U.S. Forest Service Timber Sale Program, and Trust 
Land Management. Issue Brief No. 14, Policy Analysis Group, College of 
Natural Resources, University of Idaho. 16 pp. http://www.uidaho.edu//
media/Files/orgs/CNR/PAG/Reports/PAG--IB-14--8-14-11
---------------------------------------------------------------------------
    I begin with a Problem Statement, then identify and describe Three 
Options for providing funds to counties: 1) rejuvenate the program for 
federal Timber Sales and Revenue-Sharing, 2) create a Property Tax 
Equivalency system for federal lands, and 3) test the Trust Land 
Management model with pilot projects in some selected areas. My 
Conclusion is that some kind of action, including temporary extension 
of SRS until something else is developed, is better than no action.

                           PROBLEM STATEMENT

    Unless reauthorized by Congress, payments to the counties under the 
SRS and Payments in Lieu of Taxes (PILT) programs are history and would 
have consequences. Some counties will be hard pressed to maintain local 
roads and schools without some form of payment to compensate for tax-
exempt federal lands.
    The economic impact of losing the SRS county payments program was 
presented in a 2010 consultant's report prepared for the Partnership 
for Rural America:

          The loss of [SRS] money has annual losses for the counties 
        and schools currently funded. The losses are not simply to 
        local construction, education and conservation services and 
        their allied industries. The industries affected by these 
        changes are far and wide based on how construction workers, 
        educators and conservation services employees spend their money 
        and how these rural economies work. The reduction of [SRS] 
        funding not only reduces jobs in these directly-affected 
        industries, but also affects industries such as medical and 
        dental offices, banking, auto repair, grocery and other retail 
        stores, restaurants and bars, and many others. The loss of $467 
        million of this funding leads to various businesses throughout 
        the United States losing almost $1.459 billion in revenues, 
        government at all levels losing over $225 million in tax 
        receipts, and over 11,460 people losing their job.\8\
---------------------------------------------------------------------------
    \8\ Eyler, R. (2010). Rural Policy: Secure Rural Schools Act 
Economic Impact Analysis. Economic Forensics and Analytics, Petaluma, 
CA. 6 pp. (Dr. Eyler is Chair, Economics Dept., Sonoma State 
University, CA.) http://www.partnershipforruralamerica.org/pdf/
Economic_Impact_Analysis.pdf

    Also facing its demise is the SRS feature embodied in the 
collaborative efforts of Resource Advisory Committee (RACs) to use SRS 
Title II funding for a wide variety of projects that might not 
otherwise be funded. Although timber projects can be approved under 
Title II, very few have been.\9\ Social scientists who have studied 
RACs in northern California report that most of the Title II funds were 
used to improve roads, wildlife habitat, and reduce invasive weeds.\10\
---------------------------------------------------------------------------
    \9\ GAO (2010). Update on the status of the merchantable timber 
contracting pilot program [under SRS Title II]. Letter of Anu K. Mittal 
to congressional committees, Government Accountability Office, 
Washington, DC. March 4, 10 pp. http://www.gao.gov/new.items/
d10379r.pdf
    \10\ Kusel, J., et al. (2006). Assessment of the Secure Rural 
Schools and Community Self-Determination Act. Sierra Institute for 
Community and Environment, Taylorsville, California. 235 pp. http://
www.sierrainstitute.us/archives/COMPLETE_REPORT.pdf
---------------------------------------------------------------------------
    The RACs do good work in Idaho, and could do much more. The 
collaboration between seemingly disparate interests working towards a 
common interest has proven to be a valuable model that could lead to 
more good things. We wanted to use the RAC concept on a larger scale in 
Idaho and in 2004 a subcommittee of this committee held a hearing on 
our proposal.\11\ It developed from a state task force charged by the 
legislature to develop cooperative arrangements with federal managers. 
After considerable time and effort, bills were introduced in the U.S. 
House and Senate. Had the Clearwater Basin Project Act passed, 2.7 
million acres of National Forest System lands in north central Idaho 
now would be a pilot project in which a committee patterned after the 
RACs would work with federal managers on all forest activities, not 
just special projects under SRS Title II.\12\
---------------------------------------------------------------------------
    \11\ Hearing before the Subcommittee on Public Lands and Forests, 
Committee on Energy and Natural Resources, U.S. Senate, on S. 433, ``A 
Bill to provide for Enhanced Collaborative Forest Stewardship 
Management of the Clearwater and Nez Perce National Forests in Idaho,'' 
Washington, D.C. (March 24, 2004). http://www.gpo.gov/fdsys/pkg/CHRG-
108shrg94830/pdf/CHRG-108shrg94830.pdf
    \12\ Idaho State Board of Land Commissioners (2013). ``About the 
Federal Lands Task Force'' webpage. Idaho Department of Lands, Boise, 
ID. http://www.idl.idaho.gov/LandBoard/fltf.htm
---------------------------------------------------------------------------
                             THREE OPTIONS

    If there is no congressional action this year, some counties have 
warned that they will face whatever one might call the local government 
equivalent of bankruptcy. The 25 percent revenue-sharing provisions in 
law since 1908 would remain in place, however.
    Some western state politicians are calling for changing ownership 
of portions of federal land holdings. In 2012 several states took 
action. Utah passed a law promising that if the federal government does 
not ``extinguish title'' to a large portion of the federal lands and 
give them to the state, the matter will be pursued via litigation. 
Similar legislation in Arizona was vetoed by the governor. The Wyoming 
legislature debated the issues and created a study commission; at this 
writing Idaho is poised to do the same.
    I want to talk about changing the rules, not changing ownership. 
Unless the rules are changed, ownership change would not make much 
difference. Federal managers must follow many rules, and some could be 
improved, especially the National Environmental Policy Act and National 
Forest Management Act.\13\
---------------------------------------------------------------------------
    \13\ According to one estimate, ``it is taking about 70% of the 
Forest Service's land management budget to comply with planning and 
environmental review for projects, leaving only 30% for implementation 
and work on the ground.'' Partin, Tom, ``Subcommittee to review NEPA 
cost.'' American Forest Resource Council newsletter, Portland, Oregon, 
January 23, 2013. http://www.amforest.org/newsletters/browse/
afrc_news_-_january_23
---------------------------------------------------------------------------
    I address three ideas for generating more revenue that the current 
system does: 1) rejuvenating the federal timber sale program; 2) 
replacing SRS and PILT with a property tax equivalency payment system; 
and 3) testing the trust land management model with pilot projects.

                  1. TIMBER SALES AND REVENUE-SHARING

    After World War II, returning veterans wanted and deserved the 
American dream-a home of their own. National Forest System lands 
provided a substantial portion of the timber necessary to do that. 
Building roads and mills to access and process timber strengthened 
rural communities. After Congress passed laws in the 1970s requiring 
Forest Service managers to involve the public and analyze environmental 
impacts, the decision process was opened to judicial scrutiny. In 
response to advocacy demands and court decisions, in 1990 the federal 
timber sale program was ratcheted down (Figure 1*). In the 40 years 
prior to that, between 1950 and 1989, an average of 9.5 billion board 
feet (BBF) per year were harvested from national forests. Between 1990 
and 2012, the average dropped by almost two-thirds, to 3.5 BBF per 
year. The current administration wants to increase from the current 
level of 2.5 BBF to 3 BBF per year.\14\
---------------------------------------------------------------------------
    \14\ U.S. Forest Service, Increasing the Pace of Restoration and 
Job Creation (2012, supra note 5).
    * All figures have been retained in committee file.
---------------------------------------------------------------------------
    Figure 1. National forest timber sold and harvested, 1905-2012 
(sold data not available before 1940).\15\
---------------------------------------------------------------------------
    \15\ Source: U.S. Forest Service (note: timber sold data before 
1940 are not available). http://www.fs.fed.us/forestmanagement/
documents/sold-harvest/documents/1905-2012_Natl_Summary_Graph.pdf
---------------------------------------------------------------------------
    Coincidentally, after 1990 the number of acres burned by wildfires 
in the western states increased (Figure 2*). In the 40 years between 
1950 and 1989, an average of 800,000 acres per year burned. Between 
1990 and 2012, the average increased by a factor of 3.7 to 3 million 
acres burned per year. This includes a modern record of 7.4 million 
acres burned in 2012. The increase results from the combined effects of 
accumulated fuels and longer, dryer fire seasons.
    Figure 2. Acres burned by wildfires in 11 western States, 1916-
2012.\16\

    \16\ Source data from National Interagency Fire Center, Boise, 
Idaho.
---------------------------------------------------------------------------
    We cannot do much about the weather, but we can reduce fuels in 
areas that pose high risks to the things people value. Western national 
forests have an over-accumulation of vegetation that fuels destructive 
wildfires\17\. As Forest Service Chief Emeritus Dale Bosworth put it, 
``We have some 73 million acres of national forest land at risk from 
wildland fires that could compromise human safety and ecosystem 
integrity. . . . The situation is simply not sustainable-not socially, 
not economically, not ecologically.''\18\
---------------------------------------------------------------------------
    \17\ GAO (1999). Western National Forests: A Cohesive Strategy is 
Needed to Address Catastrophic Wildfire Threats. Report no. GAO-RCED-
99-65. Washington, DC: U.S. Government Accountability Office, 
Washington, D.C. 60 pp. www.gao.gov/archive/1999/rc99065.pdf
    \18\  Bosworth, D. (2003). ``Fires and forest health: our future is 
at stake.'' Fire Management Today 63(2): 4-11. http://www.fs.fed.us/ 
fire/fmt/fmt_pdfs/ fmt63-2.pdf#firesand foresthealthourfutureisatstake
---------------------------------------------------------------------------
    Restoration treatments that improve forest conditions by reducing 
wildfire hazards provide a triple win. As U.S. Forest Service 
scientists put it, ``Implementation of any significant fuel reduction 
effort will generate large volumes of biomass and require the 
development of additional workforce and operations capacity in western 
forests.''\19\
---------------------------------------------------------------------------
    \19\ U.S. Forest Service (2005). A Strategic Assessment of Forest 
Biomass and Fuel Reduction Treatments in Western States. General 
Technical Report RMRS-GTR-149, U.S. Department of Agriculture, Forest 
Service, Rocky Mountain Research Station, Fort Collins, CO. 17 pp. 
http://www.fs.fed.us/rm/pubs/rmrs_gtr149.pdf
---------------------------------------------------------------------------
    As noted before, there are at least 65 million acres of National 
Forests System lands that could be improved by restoration treatments. 
The Forest Service relies primarily on fire as its tool, treating 3.5 
to 4 million acres per year. However, 12.5 million acres need to be 
thinned with logging equipment before fire can be safely restored. In 
2011, approximately 200,000 acres were mechanically treated; timber 
removals amounted to 2.4 BBF of timber. In 2012 that increased to 2.5 
BBF, and the agency wants to increase the pace of restoration removals 
to 3 BBF feet per year.\20\
---------------------------------------------------------------------------
    \20\ U.S. Forest Service, Increasing the Pace of Restoration and 
Job Creation (2012, supra note 5).
---------------------------------------------------------------------------
    At the current harvest level, the Forest Service is removing about 
6 percent of the annual growth. Mortality takes 6 times that, or 36 
percent of annual growth.\21\ So each year a large amount of additional 
wood fiber, some green, and a lot of it dead, is added to the forest 
fire fuel complex. Compare this to the late 1980s, when national forest 
timber harvests peaked at 12 BBF per year. Those harvests were 
equivalent to half of the annual growth, and mortality was one-fourth. 
The forest accumulated a substantial amount of additional timber 
volume, but not as much in more recent years because of reduced 
harvests.
---------------------------------------------------------------------------
    \21\ 
---------------------------------------------------------------------------
    How much timber harvest would be needed to provide revenues 
equivalent to SRS payments?\22\ The reply depends mostly on timber 
prices, and the answer is, not too surprisingly, about 12 BBF. In the 
late 1980s, national forest timber in the west sold for an average of 
$107 per thousand board feet (or MBF). Adjusted for inflation, that is 
about $206 per MBF in today's dollars. The most recent price data for 
national forest timber sales in the west averages about $50 per MBF. By 
comparison, in 2012 the average stumpage price for sawlogs from Idaho 
state lands was $196 per MBF, an indicator that perhaps the Forest 
Service could attain revenues capable of providing SRS payments with 12 
BBF per year by rejuvenating a timber sale program.
---------------------------------------------------------------------------
    \22\ See O'Laughlin, J. (2007). ``Q4. What quantity of timber 
harvest would match the Craig-Wyden payments?'' Pp. 3-4, in, Timber 
Harvests and Receipts from National Forest System Lands in Idaho. PAG 
Issue Brief No. 10, Univ. of Idaho, Moscow. 13 pp. http://
www.uidaho.edu//media/Files/orgs/CNR/PAG/Issue%20Briefs/PAG_IB10_natl-
forest-timber-sales.ashx
---------------------------------------------------------------------------
    Many interest groups support federal timber sales, including the 
Society of American Foresters.\23\ This is the path to the triple win. 
Some analysts believe that 12 BBF per year from the national forests is 
sustainable.\24\ The growth to removals ratio of 2:1 in the late 1980s 
was consistent with sustainability standards. There is more annual 
growth today, which can be an asset or liability, depending on how 
forests are managed. Although a revamped timber sale program at 12 BBF 
per year could eliminate the need for SRS payments, other issues 
remain. The social acceptability aspects of sustainable forest 
management are perhaps a more difficult barrier to overcome than 
physical sustained yield and economic viability.
---------------------------------------------------------------------------
    \23\ SAF (2012). Timber Harvesting on Federal, State, and Other 
Public Lands. Position Statement, Society of American Foresters, 
Bethesda, Maryland. 4 pp. http://www.eforester.org/fp/documents/
timber_harvesting.pdf
    \24\ E.g., Fedkiw, J. (1998). Managing Multiple Uses on National 
Forests, 1905-1995: A 90-year learning experience and it isn't finished 
yet. U.S. Dept. of Agriculture, Forest Service, Washington, DC. 284 pp.
---------------------------------------------------------------------------
    Because of record-setting wildfires in many parts of the West 
during the past decade, some groups are advocating forest restoration 
via large-scale vegetation treatments, including the Western Governors' 
Association.\25\ Professional foresters in Idaho, Nevada, Utah, eastern 
Washington, and western Wyoming support this approach.\26\ As noted 
earlier, fuel treatments on the scale necessary to reduce hazardous 
fuels will generate large volumes of woody biomass and substantial 
additions to the workforce.\27\ This is the path towards the triple 
win.
---------------------------------------------------------------------------
    \25\ WGA (2011). Large Scale Forest Restoration. Policy Resolution 
11-01, Western Governors' Association, Denver, CO. 4 pp. http://
www.westgov.org/policies/doc_download/1390-11-0
    \26\ Society of American Foresters (2011). Restoring and 
Maintaining Resilient Landscapes via Active Vegetation Management at 
Large Scales Helps Create Fire-Adapted Communities and Improve 
Responses to Wildfires. Inland Empire SAF and Intermountain SAF Joint 
Position Statement, commenting on the Western Region component of the 
National Cohesive Wildland Fire Management Strategy being prepared in 
response to a requirement of the FLAME Act of 2009. 9 pp. http://
www.usu.edu/saf/position-11-0803.pdf
    \27\ U.S. Forest Service, Biomass from Fuel Treatments in Western 
States (2005, supra note 19).
---------------------------------------------------------------------------
                      2. PROPERTY TAX EQUIVALENCY

    The idea of replacing SRS and PILT payments with a tax equivalency 
system would make federal payments to counties equivalent to what they 
would be paid in property taxes if the land were privately owned. This 
is not a novel idea. According to a Congressional Research Service 
analyst, this approach ``may be very difficult if not impossible.''\28\
---------------------------------------------------------------------------
    \28\ Gorte, Reauthorizing SRS (2010, supra note 2, p. 4).
---------------------------------------------------------------------------
    Consider, however, that the states tax timberlands and it is not 
particularly difficult. In Idaho, there are 3.1 million acres of 
private timberlands, taxed somewhere between two dollars and seven 
dollars per acre, averaging out at five dollars per acre.\29\ At that 
rate, the twelve million acres of National Forest timberlands in Idaho, 
minus about 6 million acres of roadless area timberlands that will 
never be harvested, would provide roughly $35 million to the counties, 
and BLM's half-million acres of timberlands another $2.5 million. Idaho 
receives $27.4 million under SRS. Spread across 20.4 million acres of 
NFS lands, this is $1.34 per acre, but spread across the productive 6 
million acres of timberlands, it is about $4.50 per acre.
---------------------------------------------------------------------------
    \29\ Cook, P.S. & J. O'Laughlin. 2001. Taxing Forest Property: 
Analysis of Alternative Methods and Impacts in Idaho. PAG Report No. 
20, University of Idaho, Moscow, 35 pp. http://www.uidaho.edu//media/
Files/orgs/CNR/PAG/Reports/PAGReport20
---------------------------------------------------------------------------
    Idaho ranks fourth in revenue-sharing payments, behind Oregon, 
California, and Washington. In 1989, the 25 percent revenue-sharing 
payments for the entire National Forest System peaked at $361 million, 
and about $339 million of that came from timber production activities. 
Spread across the 98 million acres of National Forest System 
timberlands, minus 50 million acres of roadless areas for a net 48 
million acres of operable timberlands, that is a payment averaging 
about $7 per acre. But of course, roadless areas, rangelands, and other 
areas not producing timber would need to pay their way at some rate 
under this system.
    The states have competent property tax assessors and 
administrators. If they were not taxing forest properties fairly, 
political outcry and subsequent adjustment would surely follow. Given 
the task, these professionals could devise a fair and workable system 
for the federal lands. Some differences between states would need to be 
ironed out by an oversight commission.

                        3. TRUST LAND MANAGEMENT

    School trust lands came as grants from the public domain at 
statehood; part of a bargain that states would not tax federal lands 
within their boundaries. States were to generate revenues for 
supporting public schools, either by selling the lands, or retaining 
ownership and selling commodities from the land, such as timber, 
forage, and minerals.
    Trusts work, and ``Trust land management is our nation's most 
ancient and durable resource policy.''\30\ In the contiguous 48 states, 
45 million acres of land grants to the states are managed under this 
model. These lands provide billions of dollars for education and other 
public purposes.\31\ Several solid principles serve as general guides 
for managing land under the trust concept: clarity, accountability, 
enforceability, perpetuity, and prudence.\32\ Two leading examples of 
states that retained and now manage timberlands for revenue production 
are in the State of Washington and also Idaho.\33\ Recently some 
interest has been expressed in applying the trust land management model 
to selected federal lands. I support that.
---------------------------------------------------------------------------
    \30\ Souder, J.A. & S.K. Fairfax (1996). State Trust Lands: 
History, Management and Sustainable Use. University of Kansas Press, 
Lawrence, KS. 360 pp.
    \31\ To be exact, $4.5 billion annually in the early 1990s, 
according to Souder & Fairfax, State Trust Lands (1996, supra note 30).
    \32\ Fairfax, S.K. (1999). Lessons for the Forest Service from 
State Trust Land Management Experience. Discussion Paper 99-16, 
Resources for the Future, Washington, D.C.; see also Souder & Fairfax, 
State Trust Lands (1996, supra note 30).
    \33\ O'Laughlin, J., S.F. Hamilton & P.S. Cook (2011). Idaho's 
Endowment Lands: A Matter of Sacred Trust, second edition. PAG Report 
No. 1, 2d ed., University of Idaho, Moscow, 35 pp. http://
www.uidaho.edu//media/Files/orgs/CNR/PAG/Reports/
Endowment%20Lands%20Report%208-7-11
---------------------------------------------------------------------------
    The trust land management model is flexible and could be adapted to 
promote biological diversity as a trust mission.\34\ It is not 
difficult, as portions of revenue from commodity sales could be 
directed into special funds. Ten years ago I was asked by the Society 
of American Foresters to testify before Congress about the Idaho 
Federal Lands Task Force, and specifically about adapting the trust 
land management model for National Forest System lands.\35\ Information 
from these earlier writings is as relevant today as a decade ago.
---------------------------------------------------------------------------
    \34\ O'Laughlin, J. (2000). Trust Concepts Applied to the Federal 
Public Lands: A New Approach for Sustaining Human Communities and 
Biological Diversity. Paper presented to the Idaho State Board of Land 
Commissioners' Federal Lands Task Force Working Group, Boise, Idaho. 11 
pp. http://www.uidaho.edu//media/Files/orgs/CNR/PAG/other%20pubs/New/
2000_trust-land-mgmt-concepts
    \35\ Clawson, M. (1984). ``Major Alternatives for the Future 
Management of Federal Lands.'' Pp. 195-234, in, Rethinking the Public 
Lands, S. Brubaker, ed. Resources for the Future, Washington, D.C. 
(Emphasis added.]
---------------------------------------------------------------------------
    Dr. Marion Clawson is an inspiration to forest policy specialists. 
He had a long and distinguished career before his passing in 1998. In 
the 1950s he was BLM director. He was a prolific and insightful scholar 
in residence at Resources for the Future, a pre-eminent think tank in 
the nation's capital, and he served as RFF's president. He wrote 
Forests for Whom and for What?-still my favorite.\36\ During the 
Sagebrush Rebellion era of the mid-1980s, Clawson wrote,
---------------------------------------------------------------------------
    \36\ Clawson. M. (1975). Forests for Whom and for What? Resources 
for the Future, Washington, D.C.175 pp.

          I reject any idea that we today are less imaginative and 
        resourceful than men and women who pressed for the 
        establishment of the national forests, national parks, and 
---------------------------------------------------------------------------
        grazing districts. We too can innovate; let us try.\37\

    \37\ Clawson, M. (1984). ``Major Alternatives for the Future 
Management of Federal Lands.'' Pp. 195-234, in, Rethinking the Public 
Lands, S. Brubaker, ed. Resources for the Future, Washington, D.C. 
(Emphasis added.]
---------------------------------------------------------------------------
    What should we try? Trusts work. More than a decade ago two parcels 
of federal land were set up as trusts-Valles Caldera Trust on National 
Forest System lands in New Mexico and Presidio Trust in California. 
Please let us put more trusts to work for our rural communities and 
schools.

                               CONCLUSION

    As our task force learned and documented in Idaho 15 years ago, the 
federal land management system is broken and needs to be fixed.\38\ 
Extension of SRS and PILT is appropriate for fulfilling past promises 
until a more permanent system can be developed, tested and implemented. 
Rejuvenating a timber sale program provides many societal benefits. 
Given appropriate policy direction, our resource managers can and will 
work with their fellow citizens to figure out what sustainable forest 
management looks like on the land, a better place to do that than in 
court. For lands that do not produce timber, some form of payment from 
a property tax equivalency system seems a reasonable approach to help 
alleviate some current fairness problems. Last, but not least, trust 
land management is our oldest and most durable model, and worth testing 
in several places.
---------------------------------------------------------------------------
    \38\ Idaho State Board of Land Commissioners, ``About the Federal 
Lands Task Force'' (supra note 20).

    Senator Cantwell. Thank you, Dr. O'Laughlin. Thank you so 
much for your testimony. I'm sure that Senator Risch 
appreciates you being here today, as I do.
    We're going to have a round of questions. I think I want to 
start with you, Mr. Haggerty.
    You propose something different but I'm a little concerned 
that, you know, part of our challenge is getting this 
legislation through the Congress. But not all our colleagues 
understand rural communities or the significant dedication that 
it takes, you know, from transportation, emergency management, 
fire suppression, roads, schools, all of those things. They 
don't understand the interrelatedness of having Federal forest 
lands and those infrastructure needs that are necessary to keep 
them maintained.
    So I wanted--how do you think your proposal would be 
scrutinized in terms of payments being shifted around as 
opposed to being directly linked as a Federal obligation and 
then Mr. Pearce or Yates, or anybody else who wants to comment 
on that.
    Mr. Haggerty. Senator Cantwell, thanks for the question. I 
think one of the things that we are trying to accomplish with 
some alternative proposals is to make it clear that, you know, 
the communities have to be first in this. Rural communities are 
struggling across the country. We recognize their plight.
    It's also true that we need some real solutions for our 
forests. We've heard a lot today about the need for restoration 
from the Chief. We certainly have fire issues in the forests.
    But what we're trying to do is find a way to separate out 
the revenue requirement in paying counties as compensation for 
non taxable Federal lands and the work that we need to do in 
supporting rural communities with jobs and treating our 
forest's health issues. The reason that we're concerned about 
returning to a revenue sharing program is that a revenue 
sharing program is volatile. It's always been volatile in the 
past. We expect that it will be volatile in the future.
    Counties need money every year. They need to have some 
certainty that they can take care of services, fund good 
schools and maintain roads.
    So the other part of right now is we need a way to fund the 
current programs. The current programs have existing problems. 
The biggest problem that we've identified is that most of the 
Secure Rural Schools and PILT funding, as appropriations 
decline, are starting to be directed more to urban counties 
than to rural counties.
    It's a problem. This is a rural program. Rural counties 
need these payments the most.
    So what we're trying to do is not necessarily make a 
statement about any one way forward. But we want to offer a 
proposal to the table that tries to meet some goals.
    One, provide predictability and fairness to counties.
    Two, we want to direct payments to the rural communities 
where they can do the most good.
    Third, we want to make sure that we can reduce spending in 
the Federal treasury over time.
    So that's the nature or that's the, kind of, goals behind 
our proposal. The specific components within it I think can be 
discussed. So.
    Senator Cantwell. Thank you.
    Mr. Pearce or Dr. O'Laughlin or Mr. Yates, any comment from 
that?
    Mr. Pearce. The conversation with the other parts of the 
country about rural communities, if I heard the question right.
    Senator Cantwell. About whether----
    Mr. Pearce. Yes.
    Senator Cantwell. Mr. Haggerty's proposal is somewhat not 
having it.
    Mr. Pearce. Right.
    Senator Cantwell. He's saying have it generally related as 
opposed to a specific formula. Obviously our challenge is a lot 
of our colleagues don't understand this to begin with. They 
think that we're talking about something here that's some give 
away to rural communities when, in fact, it is part of what is 
required for management of our national forests.
    If you're going to have that much land tied up you have to 
access it.
    Mr. Pearce. Yes.
    Senator Cantwell. How are you going to access it if you 
don't have roads? How are you going to have communities that 
are going to be the support system for those national forests 
if they don't--if they can't have emergency services or schools 
or what have you? So the notion that you're going to lock up 
all these acres and somehow draw a line around it. Say oh, 
you're only going to go in every so often.
    I think the first panel did a really good job. My 2 
colleagues here from the Chairman, Ranking Member of talking 
about what happens to the forest if they don't have access. So 
all of this is about--this is the support system that goes with 
our national forest.
    Mr. Pearce. Absolutely.
    To comment on that. I spoke earlier about just 2 searches, 
just 2, that were nearly $750,000 when you combined them. We, 
within my county, my home county, we have to run an ambulance 
service in the middle of the forest because of the amount of 
traffic that travels through that portion of the forest. It's a 
separate ambulance service and they cost $90 to $100,000 per 
year to manage that ambulance service.
    So you're absolutely right. One of the issues for us is 
that PILT for better or worse as a payment for in lieu of taxes 
is a great plan if you have a lot of acreage. But as you know 
on the west side of the mountains you have big forests that 
grow very fast that aren't necessarily large acreages.
    For instance in my county, if I were to trade SRS for PILT, 
I would get less than a million dollars in PILT funding 
compared to an SRS payment even at this last year of over $4 
million when you bring the schools and so on into it. So we do 
perform services that are much bigger than an ``11,000 person 
county'' would normally perform.
    Senator Cantwell. Thank you for that. I'm going to turn it 
back to the Chairman.
    But I'll just point out I meet so many people who will say, 
oh yes I went--they don't always know the exact name, but they 
went to the Skamania Lodge which is a national conference area. 
I meet so many people here from DC and they say oh, I went to 
your State. We went to this lodge. I'm not sure the Skamania 
Lodge would be there if you didn't--it has to have support. It 
has to have access to roads. It has to have a community and all 
those things are part of this resource.
    So, anyway I'll turn it back over to the Chairman and 
welcome back.
    The Chairman [presiding]. Thank you, Senator Cantwell.
    Where are we in terms of colleagues?
    Very good, well let's let Senator Murkowski and Senator 
Risch ask any questions. I apologize to the panel as well 
because even by Senate standards this is a hectic morning. I 
thank Senator Cantwell.
    Senator Risch.
    Senator Risch. Mr. Chairman, thank you.
    Thank you, Senator Murkowski for yielding to me. I do have 
another meeting I've got to go to. But I did want to comment 
briefly on this.
    Starting with you, Dr. O'Laughlin, you know, I've been to 
the new building where they house the natural resources and 
forestry school. When I went there we actually did walk uphill 
in deep snow to Morrill Hall, which I know you've been on. It's 
the highest building on campus. It wasn't nearly as warm and 
cozy as the new school is.
    Thank you for your testimony. I really appreciate that 
you're bringing a, more of a, standing back and looking at this 
globally as far as the problem is concerned. Because I think 
most people, as has been pointed out, don't understand the 
problems we have out West, you know.
    They really don't comprehend that the Constitution said 
every State was supposed to be admitted on equal footing. Turns 
out some States were more equal than others. We wind up with 
such a great swath of our State owned by the Federal 
Government.
    So as a result of that the government really, the Federal 
Government, has not been paying its fair share of what it gets 
out of the services from the local communities. They are very 
substantial, as has been pointed out here.
    But I like the idea of rethinking this, of stepping back 
and having another look at this. When I was Governor we wrote a 
road less plan for Idaho, as you're probably familiar with. 
That was the result of doing just what you did here. That is 
stepping back and doing it differently than the way they've 
been trying to do it for 40 years.
    The result was the collaborative method that came up with 
rule. We have the only rule in the United States today in 
Idaho. It was written by Idahoans and is now administered by 
Idahoans. We have the--Tom, in the Forest Service to thank for 
that and the Administration for joining us on that.
    You came to the right place because I have found that both 
Senator Wyden and Senator Murkowski are very good about being 
open minded and re-looking at things from a global standpoint. 
Although Senator Wyden wasn't here when you testified, I 
suspect he's going to be very interested in your testimony as 
to the 3 new ideas you've had. I'm sure there's no pride in 
authorship. I'm sure there's probably some other ideas that we 
may have a look at.
    But this need for a stable stream of income for the 
counties, school districts, road districts is so important. You 
know, it doesn't matter here to the Federal Government. They 
just borrow money. They don't have it, not a problem. They just 
go out and borrow it.
    But the cities and counties and the local districts do not 
have that luxury, most are required to balance their budget. So 
we really appreciate that. I think by--if we did step back and 
have a look at some different ways in which we should do this.
    One of the things I found on the road less issue that took 
me was one of the keys was what had been done for 40 years is 
everybody that wrote a rule for road less tried to write a rule 
that one size fits all. To me it was so obvious when I started 
to look at that that this was not going to work. As a result of 
that, we did it differently, as you know, in Idaho.
    I think maybe that may be, as we sit here and talk about 
this today, maybe one of the keys that we get the local States, 
the local units of government involved in this to craft 
something that works there that may not work in another area. 
Obviously the Forest Service is going to have to be in the--
it's going to have to be open to this. BLM is going to have to 
be open to this.
    But if we work together maybe there's a way to do this to 
where we can get the local involvement instead of a one size 
fits all since that doesn't seem to work.
    So thank you for your testimony here today. Thank all of 
you for coming today. I think probably, as far as I'm concerned 
this is been eye opening, that maybe we ought to step back.
    You've certainly been a pioneer on this, Senator Wyden. We 
all thank you for that.
    Obviously we've learned lessons through it. Maybe what we 
ought to do is take those lessons and take a step back and re-
look at how we're going to do this from a global standpoint.
    The Chairman. Senator Risch, thank you very much for those 
kind words. I think your point about stepping back and looking 
at areas where we could come up with some fresh approaches. One 
of the things that's striking about this debate is there may be 
some new ways to build on some of the approaches that have 
actually worked like these Resource Advisory Committee. I mean 
these Resource Advisory Committee, we hear. I see Mr. 
O'Laughlin, I believe is your constituent, you're from Idaho 
aren't you, sir?
    Mr. O'Laughlin. The great State of Idaho.
    The Chairman. The great State of Idaho.
    Senator Risch. The great State of Idaho, Senator Wyden.
    The Chairman. OK. I looked at your testimony. We'll have 
some things we want to ask. I mean this is something that I 
think we've had now for a few years. Industry folks say they 
like it. Environmental folks say they like it.
    I remember, like it was yesterday, Senator Craig and I 
having conversations about how we would come up with some 
resolution with respect to Secure Rural Schools. Of course any 
time back then people talked about it they talked about 
sufficiency language. I said, bad history on that because we 
remember all of the litigation, the fighting and, you know, the 
protests. Let's try to find something as an alternative.
    I remember when we hit on that I said this really looks, 
just as you said, like something that would have a chance to 
bring people together. I think we ought to be trying to do 
that, you know, again.
    Senator Risch. You know, you're right on that, Senator 
Wyden. When we did the road less rule in Idaho we provided in 
the rule for a RAC type committee. It was modeled after this 
committee. They are the ones in Idaho that are actually meeting 
regularly to administer the road less lands and whatever 
happens in those road less lands.
    It is made up of the same type of collaborative group that 
we had that wrote the rule. It really is working. As you say, 
people who are not customarily talking with each other, it has 
worked very well.
    So, thank you, thank you for providing that model to start 
with, but----
    The Chairman. We're going to be working closely with you, 
Senator Risch.
    Let's--Senator Murkowski I know has a question or 2 and 
then I'm going to touch on something and we'll wrap up. You all 
have been very patient. Thank you.
    Senator Murkowski. Thank you, Mr. Chairman.
    I do want to acknowledge the work of my colleague on what 
he did in Idaho with the road less rule. We wish that we had 
been able to accomplish the same. Maybe we need to look to 
collaborate a little bit more because we're so snarled up on 
road less right now in Alaska.
    But that's a subject for another hearing.
    I want to thank those of you who have participated here 
today. I think that this panel was very helpful just in 
offering up some suggestions out there, helping us think a 
little bit outside the box. I think this is the difference 
between being within the Administration and saying we can't say 
anything about proposals. We'll talk to you later.
    You folks that are--that have put some study into it, some 
thoughts, maybe a little bit of controversy here. Mr. Yates and 
Mr. Haggerty are clearly on opposite sides when you talk about 
the consolidation, if you will, between PILT and Secure Rural 
Schools. But that's good for us to hear. It's good for us to 
look at what the options might be.
    Dr. O'Laughlin, I appreciate what you have done in just 
your assessment, your review of alternate governance 
arrangements for our national forest systems. I think this is 
critically important for us to look at. I would hope or maybe I 
could just ask you to look at what Alaska is proposing and give 
me your comments on that whether you think that that might be 
something that is workable.
    We think it's an alternative. The Governor certainly does. 
His task force has put that out. But I'd be curious to know 
your comments if you would be willing to provide them.
    I wanted to ask you a question, Mr. Pearce. It's my 
understanding that it's your position and that of the 
Partnership for Rural America that you would--you'd say OK, 
well give up Secure Rural School dollars to get forest 
production. Then it's not just about restoration. It's about 
restoring timber production. Is that a fair assessment of your 
views?
    Mr. Pearce. Not to be contrary, but I would disagree that 
that's where we're at.
    Senator Murkowski. OK. Alright.
    Mr. Pearce. Senator, if I could speak to it for just a 
moment.
    We are pursuing a collaborative conversation with folks 
across the country from all sides taking the RAC model as a 
model, as a matter of fact, to try to bring organizations 
together to have the same kinds of conversations that RACs are 
having at the local level. Then our principles for pursuing 
forest health legislation, we do in fact feel very strongly 
there has to be bridge funding. The short term bridge funding 
for counties is absolutely necessary.
    There's just no question about it. We have counties that--
--
    Senator Murkowski. But we also recognize that we've been 
doing short term--
    Mr. Pearce. Absolutely. Thank----
    Senator Murkowski. Bridge funding for a long time. That 
bridge is getting real long.
    Mr. Pearce. We agree with you. Absolutely. As a 
commissioner who spent the last 8 years literally half of my 
time here because of that funding. I can tell you that.
    But I think what I would like to say is our mission is long 
term economic vitality for rural communities. It must include 
legislation that requires active, sustainable forest management 
to achieve resilient forest lands managed by both the U.S. 
Forest Service and Oregon and California forests. We want to 
see landscape restoration because we know that landscape 
restoration means timber.
    We know that these monocultural forests that were planted 
by man that are not natural. In order to bring them to a 
natural State will require a very long time to do that. It will 
require timber production. It will require jobs in our small 
communities and companies to come into our small communities.
    I would argue that we are really looking at legislation for 
forest management on the broadest possible plane you can find.
    Senator Murkowski. That would certainly include active----
    Mr. Pearce. Active.
    Senator Murkowski. Forest management reforms.
    Mr. Pearce. Absolutely. Yes, ma'am.
    Senator Murkowski. Yes. Yes. Good.
    Gentlemen, thank you all for not only your testimony here 
this morning, but for your efforts as we work to find a more 
long term, sustainable solution.
    I'll just conclude with a note to Mr. Haggerty. You 
mentioned that if we go to a revenue sharing type of concept 
that injects volatility. I would suggest that our Federal 
Government and what we do with our budget deliberations on an 
annual basis is equally volatile. We would like to figure out a 
better path. I think you would all agree with us on that.
    So we look forward to working with all of you.
    Mr. Chairman, I suggested when--before the prior panel was 
dismissed I had asked specific questions of the Chief and of 
Ms. Haze as to what they might provide to the Committee in 
terms of recommendations. They were politically vague which is 
not surprising. But I did suggest that perhaps we all would 
have an opportunity to sit down with them and pick their brains 
and that of these individuals again that are focused on some 
pretty important stuff.
    So, look forward to doing that with you.
    The Chairman. Let's do it.
    Thank you, Senator Murkowski.
    I apologize again to all of you for having to be out. I did 
read your testimony last night. I think all of you while having 
obviously differing views were trying to be sensitive to the 
fact that there is a challenge to try to deal with the short 
term and the long term.
    I think rather than keeping you any longer I just want to 
say we're going to be reaching out to you more in the days 
ahead. What's going to be different about this--and essentially 
we've had what amounts to 4 reauthorizations, if you kind of 
look back through the history, we are going to make sure that 
no one tries to put the short term and the long term out there 
as if they were mutually exclusive. They are not.
    We need to find a way that intertwines. Whether you call it 
a bridge or what have you, something that ensures that these 
rural communities that have taken such punishing hits in the 
last few years, can keep their doors open while in effect the 
Congress goes through what very often seems like a slow burn 
when it comes to legislation. I think you heard from Senators 
today a real desire to look at some fresh ideas with respect to 
the long term.
    That's why I hit for example on the common bonds between 
all the communities where there is Federal land and Federal 
water. Literally when I went to Senator Landrieu's State and 
Senator Murkowski's State, I was struck by how the 
conversations were so similar to the ones we have in rural 
Oregon where you have folks from the timber industry who would 
like to get the cut up, as I would, working with folks who are 
in the environmental community trying to protect some old 
growth as I would also like to do.
    So I think there is a lot to work with here. As you could 
see it's not going to be partisan. Having talked to 
Administration officials such as Secretary Vilsack here 
recently, I think we're going to see the Administration very 
interested in these conversations.
    So my apologies for having missed a decent chunk of your 
comments. I want you to know I did read your remarks last 
night. Clearly you all have subscribed to the idea that it's 
time for some new thinking. That's certainly all we can ask 
for.
    With that the Energy and Natural Resources Committee is 
adjourned.
    [Whereupon, at 12:27 p.m., the hearing was adjourned.]

    [The following statement was received for the record.]

    Statement of Athan Manuel, Director, Lands Protection Program, 
                              Sierra Club

    On behalf of the Sierra Club's 2.1 million members and activists, I 
am writing to support the Committee's examination of both short and 
long-term solutions to the challenges posed by the much needed payments 
to local governments, via Secure Rural Schools (SRS) and Payment in 
Lieu of Taxes (PILT).
    As you know, the Secure Rural Schools and Community Self 
Determination Act program is expiring, leaving rural communities across 
the country in financial risk. This program provides important funding 
for schools, community services, and roads in more than 1,900 counties 
in 49 States, the District of Columbia, Guam, Puerto Rico, and the U.S. 
Virgin Islands. SRS has received broad bipartisan support since its 
original passage in 2000 because it helps the economic stability and 
sustainability of rural communities. As noted in previous 
communications with Committee members and staff, the Sierra Club 
encourages a short-term reauthorization of SRS. As the nation struggles 
to support public sector jobs and services during a time when the 
economies of many rural areas continue to struggle, a short-term 
extension of this program provides an opportunity to maintain support 
for rural areas as we identify a more sustainable long-term solution.
    For more than 100 years, hundreds of counties across the United 
States have received payments from the federal government as part of a 
compensation process for non-taxable Forest Service and Bureau of Land 
Management (BLM) lands. By decoupling payments from commodity receipts 
and introducing new funding for projects on public lands, SRS has 
helped counties with the transition away from unsustainable dependence 
on logging to a more diverse economic base in the face of declining 
timber production on public lands and changing economic opportunities 
related to restoration and conservation.
    As SRS represents only a temporary solution, the Sierra Club is 
committed to supporting the Senate's efforts to create a long-term 
solution that identifies alternate funding sources that also protect 
our nation's wild places, clean air and water, and wildlife. We look 
forward to discussing ideas and opportunities with staff, and 
continuing to consider how we might best address the needs of rural 
communities while maintaining a healthy environment for all to enjoy in 
future generations.
    As the Committee reviews various proposals, the Sierra Club would 
like voice our concern regarding any effort that would essentially 
industrialize or privatize our public lands. Such efforts will damage 
watersheds and pollute drinking water and put our western water supply 
at risk. Our public lands are also our economic engines. The most 
recent 2012 report from the Outdoor Industry Association confirms that 
the outdoor recreation industry directly supports 6.1 million jobs and 
contributes over $646 billion annually to the U.S. economy. Similarly, 
the U.S. Forest Service's most recent annual visitor survey showed that 
Forest Service lands attracted 166 million visitors in 2011, and that 
visitor spending in nearby communities sustained more than 200,000 
full- and part-time jobs. At the local level, according to the Bureau 
of Land Management, in 2010 there were a total of 6,811 jobs on Oregon 
BLM lands associated with recreation, accounting for a total of 
$662,400,000 in output. Also, the most recent data from 2011 shows 
about 5.5 million visits were recorded on Western Oregon BLM associated 
with recreation. Finally, National Parks continued to be important 
economic engines for local communities in 2011, with visitors 
generating $30.1 billion in economic activity and supporting 252,000 
jobs nationwide.
    The Sierra Club supports a dual track approach that both secures 
the needs of rural communities in the short-term, while we examine 
options for a long-term solution that maintains a commitment to the 
protection of our nation's natural heritage.
    We thank the committee for their commitment to this issue and look 
forward to future hearings and discussion on these matters.

                                APPENDIX

                   Responses to Additional Questions

                              ----------                              

     Responses of Mark Haggerty to Questions From Senator Murkowski

    Question 1. In your testimony you conclude that continued 
decoupling of payments can lead to new dedicated funding streams from 
public lands, and you go on to cite oil and gas, and leasing fees. I 
find this confusing in that your testimony focuses a great deal on 
volatility and the boom and bust cycles of commodity-extraction, yet 
why do these extractive uses escape scrutiny? Why does timber get 
singled out?
    Answer. In our testimony, we reviewed the history of the Forest 
Service and Bureau of Land Management (BLM) O&C revenue sharing 
programs to highlight the challenges associated with volatility and to 
help provide context and information that could be useful in crafting a 
long-term solution.
    The boom and bust cycles inherent to commodity markets suggests 
several things: returning to revenue sharing as the basis for providing 
compensation for non-taxable federal lands will result in lower 
payments for most communities relative to Secure Rural Schools (SRS), 
that compensation to individual counties will vary dramatically in 
amount (meaning payments are inequitable for the purpose of tax 
compensation), and that payments will be highly uncertain from year to 
year.
    Revenue sharing from oil and natural gas bonus payments, rents, and 
royalties will face similar challenges associated with timber revenue 
sharing payments. The testimony does not exclude these revenue sources 
from scrutiny, or single out timber.
    If decoupling is important to providing stable, predictable 
payments for communities dependent on timber, the same will be true for 
compensation made to counties more reliant on oil and natural gas to 
fund local services and infrastructure.
    In other words, compensation made to counties for non-taxable 
federal land will best serve the needs of counties if these payments 
are decoupled from annual commodity receipts regardless of the source 
of those receipts, be it timber, oil and gas, renewable energy, or 
other similar tax, fee, or royalty payment.
    As Senator Murkowski noted during the hearing, continued 
appropriations are no more certain for counties than are payments made 
from commodity receipts. That is why the testimony offered 
recommendations for reform that will more efficiently and equitably 
distribute payments that could also allow Congress to lower the overall 
cost of the program. The testimony also offered the observation that 
decoupling allows communities, agencies, and Congress to work together 
to find ways to identify dedicated sources of funding to reduce or 
eliminate the need for appropriations over time. It is up to Congress 
to decide how to fund payments in the future, and our brief reference 
to ongoing discussions about potential new revenue sources should not 
be interpreted as funding recommendations.
    Question 2. One of the key purposes of the Secure Rural Schools is 
funding for rural schools. What impact does the expiration of the SRS 
program have specifically on schools? Does that impact on the schools 
vary by state? Please explain. In your explanation please include a 
breakdown by state and county of the amounts and percentage of funds 
allocated to schools.
    Answer. Payments from the Forest Service through the 25 Percent 
Fund and the expired SRS program are restricted to fund roads and 
schools. Congress left to the states to determine how to allocate 
Forest Service payments, and each state allocates a different share of 
payments to schools.\1\ Vermont allocates 100 percent of Forest Service 
payments to school districts. Most other states allocate between a 
quarter and three quarters of payments to schools.
---------------------------------------------------------------------------
    \1\ Federal legislation mandated that payments fund county roads 
and schools, but left to states how to allocate the funds between these 
two services. See Congressional Research Service Memorandum, Forest 
Service Revenue-Sharing Payments: Distribution System. November 19, 
1999. Ross Gorte. (attached to this document as Appendix A.*
    *Appendix A has been retained in committee files.
---------------------------------------------------------------------------
    States also differ on how the payments allocated to schools are 
distributed. A majority of states pass the funds directly back to local 
school districts based on National Forest acreage in each district, 
meaning Forest Service payments to schools represent additional revenue 
to those districts that have public lands. Some states retain the 
Forest Service payments and add them to state school equalization funds 
meaning Forest Service payments are distributed to schools across the 
state with no basis in National Forest acreage. States that do not 
distribute payments directly to local schools include: Arizona, 
Arkansas, Colorado, Louisiana, Missouri, Nebraska, New Mexico, Oregon, 
Pennsylvania, Tennessee, Vermont, Washington, and Wyoming.\2\
---------------------------------------------------------------------------
    \2\  An Inquiry into Selected Aspects of Revenue Sharing on Federal 
Lands. 2002. A report to the Forest County Payments Committee, 
Washington, D.C. Research Unit 4802-Economic Aspects of Forest 
Management on Public Lands, Rocky Mountain Research Station, USDA 
Forest Service, Missoula, MT.
---------------------------------------------------------------------------
    For example, Oregon retains SRS payments in the state equalization 
fund and shares SRS funds with all schools in the state. To put the 
case of funding for Oregon schools in perspective, it is useful to know 
that SRS payments make up a small portion of the Oregon school budget 
and that SRS payments are currently paid on a declining annual basis. 
In FY 2009, SRS payments to schools in Oregon amounted to $25 million, 
which was about one percent of the three billion dollar State School 
Fund budget for 2009-2010. If SRS is not renewed and federal land 
payments revert to revenue sharing based on commodity production, we 
estimate Oregon's schools would receive between four and five million 
dollars-or about 0.13 percent of the current State School Fund.\3\
---------------------------------------------------------------------------
    \3\ Oregon Department of Education, Oregon State School Fund (SSF). 
http://www.ode.state.or.us/search/results/?id=168 (last accessed 11/22/
10).
---------------------------------------------------------------------------
    The two important points are that schools with federal lands in 
others states that add payments to equalization formula do not benefit 
from SRS or the 25% Fund, and because they do not benefit, they will 
not be harmed if Forest Service payments decline (if SRS is not 
reauthorized). In contrast, in states that do return Forest Service 
payments directly to local districts, schools will be exposed to 
significant funding declines if SRS is not reauthorized.
    It is also important to understand that PILT is designed as a 
safety net that provides certain funding to counties if revenue sharing 
payments falter. Only county governments are eligible to receive PILT, 
and school districts have no similar safety net for declining federal 
compensation for non-taxable lands. For example, school districts in 
Idaho and Montana are highly exposed to changes in Forest Service 
payments because schools will not be compensated by PILT, while schools 
in Oregon and Washington will not see significant revenue declines 
because they are not direct beneficiaries of Forest Service payments.
    The attached map* shows how payments change to both county 
governments and school districts only for the county and local share 
(25% fund, Title I and Title III) if SRS goes away and PILT is fully 
funded. Notice that almost all counties in Washington State will see no 
change, other than the four counties subject to the population ceiling 
payment amount in PILT. In Montana and Idaho, by contrast, every county 
that received an SRS payment will see declines, and these declines 
include the impact to school districts.
---------------------------------------------------------------------------
    * The map had been retained in committee file.
---------------------------------------------------------------------------
     Responses of Mark Haggerty to Questions From Senator Barrasso

    Question 1. In your testimony, you make the case county payments 
should be decoupled from the source of revenue, as this allows new 
revenue to come from anywhere including higher oil and gas royalties, 
new leasing fees, and a carbon tax. Are you proposing to redirect 
onshore oil and gas revenues that would otherwise go to producing 
states such as Wyoming, Colorado, New Mexico, Utah, and Montana to non-
producing states such as Oregon and Washington?
    Answer. Under the recently expired SRS program, payments to each 
county were determined based on a formula that included historic 
revenue sharing payments, the number of acres of federal land in each 
county, and an adjustment for per-capita personal income. SRS payments 
were funded at a certain level each year that was determined by 
Congress. The full SRS authorization was funded first from receipts 
generated on public lands and then from the federal Treasury.
    If SRS is reauthorized with or without reforms, we do not recommend 
that the basic structure of a formula-driven, predictable payment to 
counties funded by a combination of receipts from public lands and the 
federal Treasury change.
    We recommend that Congress maintain decoupling between payments 
made to compensate counties for the presence of federal public lands 
and annual receipts but do not make any recommendations to the source 
of funding. That is for Congress to determine.
    Question 2. In general, do you believe higher taxes and additional 
fees are good for economic growth and consumers?
    Answer. The purpose of the hearing was to examine the options and 
challenges related to possible reauthorization and reform of two 
federal payment programs for local governments-the recently expired 
Secure Rural Schools and Community Self-Determination Act and the 
Payment in Lieu of Taxes.
    In our testimony, we review the history of revenue sharing payments 
to highlight the challenges inherent to funding basic local services 
from a volatile federal payment program. Based on this history, we 
recommend that a long-term solution to compensation for non-taxable 
federal lands maintain the current decoupling between payments to local 
governments and annual receipts.
    We do not make any recommendations to how the programs should be 
funded. We only suggest that if federal land payments to counties are 
reauthorized in a way that they are stable, predictable, and equitable, 
the source of funding is no longer important to the performance of the 
compensation programs and funding could come from a wide variety of 
options.
    Question 3. In your testimony you state County payments should not 
be tied to the boom and bust cycle of commodities such as timber. Would 
not payments stemming from oil and gas royalties and fees also be 
subject to the ups and downs of markets?
    Answer. Yes. In my testimony, I reviewed the history of the Forest 
Service and BLM O&C revenue sharing programs to highlight the 
challenges associated with volatility and to help provide information 
that could be useful in crafting a long-term solution.
    The boom and bust cycles inherent to commodity markets suggests 
several things: returning to revenue sharing as the basis for providing 
compensation for non-taxable federal lands will result in lower 
payments for most communities relative to SRS, that compensation to 
individual counties will vary dramatically in amount (meaning payments 
are inequitable for the purpose of tax compensation), and that payments 
will be highly uncertain from year to year.
    Revenue sharing from oil and natural gas bonus payments, rents, and 
royalties will face similar challenges associated with timber revenue 
sharing payments. The testimony does not exclude these revenue sources 
from scrutiny, or single out timber.
    Question 4. How do higher taxes and fees on natural resources such 
as oil and gas bring jobs back to counties rich with timber resources?
    Answer. We recommend that the best way federal land compensation 
programs can aid economic development in rural communities is to 
provide stable, predictable payments as compensation for non-taxable 
federal lands.
    We do not make any recommendations to how the programs should be 
funded. That is for Congress to determine.
    Question 5. What would be the economic impact of higher taxes, 
fees, and royalties for county governments where oil and gas is 
produced?
    Answer. The purpose of the hearing was to examine the options and 
challenges related to possible reauthorization and reform of two 
payment programs for local governments-the recently expired Secure 
Rural Schools and Community Self-Determination Act and the Payment in 
Lieu of Taxes.
    We do not make any recommendations to how the programs should be 
funded, that is for Congress to determine.
                                 ______
                                 
    Responses of Jay O'Laughlin to Questions From Senator Murkowski

    Question 1. Some have suggested that the expiration of the Secure 
Rural Schools program is actually an opportunity to experiment with 
alternative governance arrangements for national forest system lands. I 
understand that you have studied the state trust land model and believe 
it can be adapted successfully for national forest system lands.
    Can you elaborate on how the state trust land model can be adapted 
for national forest system lands?
    Answer. It is my privilege to do so. Our nation's oldest, most 
durable resource management model is the trust concept applied to 
managing lands granted at statehood to support public schools and other 
public institutions. The trust model is used by 22 states to manage 135 
million acres of land and creates cash flows of billions of dollars for 
trust beneficiaries, primarily public schools. The trust model is based 
on principles of clarity, accountability, enforceability, perpetuity, 
and prudence. Thus trust land management is capable of attaining 
sustainable resource management on public lands, and likely more 
capable than the hodgepodge of overlapping statutory mandates, 
administrative regulations, and case law precedents that characterize 
the current situation.
    Of the five trust principles, only enforceability is evident on 
National Forest System (NFS) timberlands. As a result of extensive 
litigation, mostly regarding procedural failure rather than substantive 
environmental quality issues, federal courts have become de facto land 
and resource managers. As contrasted with the trust principles, NFS 
objectives are unclear, managers are generally unaccountable for their 
actions, at least 65 million acres of NFS timberlands are in a 
condition that cannot be perpetuated (i.e., an unsustainable condition 
due to excessive fuel loads), and the decision process is imprudent 
because the National Forest Management Act (NFMA) relieves the U.S. 
Forest Service (USFS) from having to employ efficiency guidelines that 
ordinary businesses follow.
    Trust settlor and trust components.--The creator of a trust is 
called the settlor. For a land management trust on NFS timberlands 
Congress would be the settlor. Trust components are briefly described 
as follows. The trust corpus is a body of assets placed under trust 
management, in this case, timberlands. The settlor creates a mission 
statement defining land and resource management objectives, identifies 
the trust beneficiaries, and appoints a board of trustees to set 
policies and oversee trust land managers, who presumably would be 
federal agency personnel. In essence, the lands in the trust are 
managed for the beneficiaries rather than ``the public'' and the 
trustees have a fiduciary obligation to act with undivided loyalty to 
the beneficiaries.
    Funding the trust.--To make the trust work, funding mechanisms are 
needed that promote prudent businesslike management of the trust's 
revenue-producing assets. Eventually a timberland management trust 
could become self-sustaining if it had a sufficient amount of 
timberlands. Given the current county payment situation, some bridge 
funding would be needed until revenues begin to flow into the trust 
fund accounts. To be sustainable the trust must be economically viable 
and able to provide outputs of goods and services consistent with the 
trust mission as well as perpetuate and sustain the trust assets.
    Biodiversity considerations.--Several provisions of federal laws 
that do not apply to state trust lands must be addressed to adapt the 
trust model to NFS lands. Foremost among them is the NFMA mandate to 
provide a diversity of plant and animal species. As USFS Chief Emeritus 
Jack Ward Thomas once pointed out in the context of northern spotted 
owl conservation, the NFMA diversity mandate is more difficult for the 
USFS than meeting the requirements of individual species protected by 
the Endangered Species Act. The trust model can be adapted to include 
species diversity as a trust mission, and assets and cash flows from 
them can be dedicated for that purpose in a biodiversity trust fund 
account.
    Valles Caldera Trust.--Application of the trust model to NFS lands 
is not novel. Some NFS lands in New Mexico that have been managed since 
2000 as the Valles Caldera Trust, a national preserve. Its mission, 
however, is as vague as that of the NFS: protect and preserve the 
scientific, scenic, geologic, watershed, fish, wildlife, historic, 
cultural, and recreational values of the lands and to provide for 
multiple use and the sustained yield of renewable resources. Although 
it was designed as a revenue-producing trust with a self-sufficiency 
goal, it is proving impossible to meet because the resource base is not 
substantial enough.
    Mission statement.--State trust lands have more precisely defined 
missions than the Valles Caldera Trust. For example, as per the Idaho 
Constitution, the lands granted from the public domain at statehood 
must provide ``maximum long-term financial return'' for trust 
beneficiaries, mostly the public schools. However, eight other public 
institution beneficiaries also receive monies placed into their trust 
fund accounts, including the University of Idaho. The trust settlor 
(i.e., Congress) could dedicate some of the public lands trust assets 
to generate monies for a biodiversity trust fund, and wildlife 
advocates could be represented on the board of trustees to ensure that 
the trust assets are used prudently and the revenue-generating capacity 
is perpetuated. Other social concerns such as recreation opportunities 
could be similarly included in the trust's organizational structure 
with its own trust fund account. So, too, could local government 
officials who have come to rely on federal payments as compensation for 
not taxing federal lands.
    Collaborative decision-making.--The current NFS governance system 
works best when citizen interest groups collaborate among themselves 
and recommend actions to the land managers. In theory this reduces 
litigation over project proposals, but it is slow and not without its 
critics. The current model stops short of power-sharing between 
interest groups and managers, which I view as a flaw that probably 
cannot be remedied under current laws and regulations. Under the trust 
model, a local collaborative management group could be created to not 
only work with and advise the trust land manager, but given power to 
make decisions with the manager or otherwise hold managers accountable 
for not implementing the group's recommendations. What about national 
interests? It is debatable whether there is such a thing as a national 
interest that is not present in an inclusive group of local interests. 
But if there is, then the national interest could be represented on the 
board of trustees, rather than the local collaborative group.
    Question 2. You stated in your testimony that in your view we could 
sustainably harvest enough timber from national forest lands to provide 
revenues equivalent to SRS payments. This conflicts with the testimony 
of Chief Tidwell of the Forest Service, who stated that the Forest 
Service would need to cut 16.2 billion board feet to meet the SRS 
payments and that this would be virtually impossible to accomplish.
    Do you agree with the Forest Service that they would need to cut 
16.2 billion board feet provide to revenues equivalent to SRS payments?
    Answer. No, I do not agree with that statement. Revenues are a 
function of price as well as quantity. Timber price is determined by 
many things, including market demand, timber quality, and contract 
stipulations timber purchasers must follow that add costs to their 
operations and reduce the price they are willing to pay for timber. 
Market demand is beyond the control of the USFS, but the agency can 
change the quality of timber sale offerings and the administrative 
rules for timber sales.
    How much timber is needed, and at what price, to provide revenues 
equivalent to SRS payments? In 2009, SRS payments peaked at $438 
million. With the 25% revenue- sharing policy that has been in place 
since 1908, revenues of more than $1.7 billion would be needed to 
generate SRS payments. If it would take 16.2 billion board feet (BBF) 
to generate $1.75 billion in gross revenues, then the average timber 
price is calculated as $108 per thousand board feet (MBF). The question 
now can be reframed: Is $108/MBF an accurate reflection of the value of 
national forest timber? Not necessarily. It could be higher, or it 
could be lower. In 2011 and 2012 the average price for NFS timber 
harvested was $53/MBF and $55/MBF, respectively. By comparison, the 
price for timber sold from Idaho's state trust lands averaged $200/MBF 
in 2012; in Washington state, $330/MBF in 2011, and an average of $300/
MBF over a ten-year period from 2001-2011.
    Question 2a. Please describe what a sustainable timber program on 
national forest system lands would look like that would provide 
revenues equivalent to SRS payments. What quantity of timber does this 
represent?
    Answer. During several years in the late 1980s, national forest 
timber sales were as high as 12 billion board feet (BBF). Some analysts 
would argue that 12 BBF/year is sustainable; if sold at an average of 
$142/MBF then the 25% revenue-sharing policy would provide monies 
equivalent to SRS payments at their peak level. Now consider that if 
the Forest Service would harvest its self-determined Allowable Sale 
Quantity (ASQ) of approximately 6 BBF/year at an average price of $292/
MBF, that would provide for peak SRS payments.
    Is 6 BBF/year sustainable? By definition, the ASQ can be considered 
sustainable, at least in the biophysical sense. When the USFS was 
harvesting 12 BBF/year in the late 1980s, that was equivalent to only 
about half of the annual growth increment. If the entire annual growth 
increment were harvested during a year, the volume of timber in the 
forest would be the same at the end of the year as it was at the 
beginning. So even at 12 BBF/year, the timber harvest level was 
biophysically sustainable, and forest growing stock was increased by a 
large increment each year. With timber sales currently at 2.5 BBF/year, 
a very large increment is added each year. As a result forests are 
overstocked and trees struggle to compete for the limiting factor on 
each forest site-usually water in the Interior West and nutrients or 
sunlight elsewhere-and annual tree mortality has been increasing in 
every inventory period since the timber sale program began to wind down 
rapidly starting in 1990.
    Sustainable forest management must be economically viable and 
socially acceptable as well as biophysically feasible. According to 
deceased Congressional Research Service analyst and forester Robert 
Wolf, in the late 1980s the USFS timber sale program had not paid its 
own way in any single year since the agency was created, despite USFS 
claims that the program was profitable. Wolf fixed the blame on a USFS 
failure to fully account for program costs.\1\ Since then timber sale 
volumes have declined, while procedural requirements have not, so costs 
are likely even higher per unit of timber sold. However, the main 
reason the federal timber sale program now struggles to produce 2.5 
BBF/year instead of 12 BBF/year is social acceptability. Segments of 
society have made it clear that they wanted timber sales reduced, if 
not eliminated, and when they go to court to enjoin a proposed USFS 
timber sale project, they often are successful.
---------------------------------------------------------------------------
    \1\ Wolf, R.E. 1989. National Forest timber sales and the legacy of 
Gifford Pinchot: Managing a forest and making it pay. University of 
Colorado Law Review 60: 1037-1078.
---------------------------------------------------------------------------
     Responses of Jay O'Laughlin to Questions From Senator Barrasso
    Question 1. Dr. O'Laughlin, the U.S. Forest Service believes that 
increasing timber production from our forests to provide revenues 
equivalent to SRS payments is basically impossible. Do you agree with 
the Forest Service that this is next to impossible?
    Answer. I would stop short of agreeing that it is impossible and 
say instead it is highly unlikely, mainly because of the current set of 
rules the agency must follow. These complicated rules test managers' 
patience as well as their ability to make scarce budget resources do 
everything that laws and regulations require. The USFS spends half or 
more of its land management budget on planning and environmental 
analysis documents that are often successfully litigated for procedural 
failing. It may be time to change the rules, as several western states, 
specifically Utah and Idaho, are formally calling for a change of 
ownership. While those calls are being tested in legal venues, some 
rule changes could be tested on the land. The state trust land 
management model can be implemented on lands that remain in federal 
ownership. This is not a novel idea, as some NFS lands in New Mexico 
have been managed as the Valles Caldera Trust since 2000.
    If the ASQ were harvested, what would the price need to be? Putting 
aside planning, analysis, and administrative costs for the moment, let 
us assume that the agency has sufficient resources to cut as much 
timber as it wanted to. The Allowable Sale Quantity (ASQ) concept sets 
a ceiling on what managers feel is a sustainable level of timber 
harvest.\2\ The current ASQ across all NFS lands is about 6 BBF/year. 
If that quantity of timber was sold at an average price of $292/MBF, 
then the USFS would have gross revenues equivalent to SRS payments at 
their highest level. The current price is an average of $54/MBF. 
Perhaps Congress should consider what additional resources the agency 
needs to harvest the ASQ, which is about 2.4 times its current harvest 
level of 2.5 BBF/year, and require adjustments in agency practices so 
that higher quality timber could be sold under less onerous rules that 
would attract higher prices for sales. Some administrative rules would 
likely have to be changed to do that, but I do not understand 
procedural and contractual details well enough to make a 
recommendation. However, I do believe that Congress could improve the 
current situation and make land and resource management plans more 
meaningful by setting the ASQ as a target, not a ceiling, and 
specifying how the ASQ should be determined so that it is sustainable. 
If a land and resource management plan fails to do that, it is in my 
opinion not a very useful plan.
---------------------------------------------------------------------------
    \2\ Brown, G., J. O'Laughlin, and C.C. Harris. 1993. Allowable sale 
quantity (ASQ) of timber as a focal point in national forest 
management. Natural Resources Journal 33(3): 569-594.
---------------------------------------------------------------------------
    Question 2. Would linking timber management to revenue generation 
lead to unsustainable logging?
    Answer. No. The trust model used by the states to manage lands 
granted at statehood for supporting public education generally has a 
revenue- generating mission objective. If the mission is for long-term 
revenue generation, as in Idaho, then the trust land manager must 
protect and perpetuate the sustained-yield capacity of the land or be 
in violation of the long-term revenue-production mandate. My 
observations are that state trust lands in Idaho, Montana, and 
Washington are managed sustainably under a revenue-production mission 
objective. I suggest some pilot projects on federal lands to test this 
question as a working hypothesis. Then arguments could be based on 
evidence rather than speculation.
    What is meant by sustainable logging? Logging is a forest 
management tool, and sustainable forest management must be 
biophysically feasible, economically viable, and socially acceptable. 
There are some who will argue that state trust land timber harvests are 
not sustainable, and that the current harvest of 2.5 BBF/year on 
national forests is unsustainable. Others can be expected to argue that 
state trust lands are managed sustainably. And some might even argue 
that the 12 BBF/year harvests of the late 1980s on national forests 
were sustainable. The NFMA does not require the USFS to practice 
sustainable forest management, but perhaps it should. A starting point 
would be revisiting the conditions under which timber harvest is 
permissible, and the NFMA partially addresses that question by 
restricting harvests to ``mature trees'' as defined by the non-economic 
criterion of culmination of mean annual increment, which falls at a 
much older age than the cutting age of forests managed for revenue 
production. Third-party certification of sustainable forest management 
has been tested on NFS lands. Whether certification should be a 
requirement under the current system has been debated and the answer 
was no. Although certification is costly, it has public relations value 
and could be a useful approach to test as a feature of trust land 
management pilot projects.
    Biophysical feasibility--The annual forest growth on all NFS 
timberlands is about 6.5 billion cubic feet, or roughly 32 BBF, with 
annual mortality representing about 11 BBF. That means if the 
centuries-old sustained-yield rule of thumb - don't cut more in a year 
than the forest grows-were the guideline, then the national forests 
could provide a sustainable timber harvest of 32 BBF based on gross 
growth or 22 BBF/year based on net growth. That means if 22 BBF were 
harvested in a year, there would be the same amount of live green 
forest growing stock at the end of the year as at the beginning. A 
legitimate set of questions that I do not believe have ever been asked 
would be, what is the appropriate growing stock volume for NFS 
timberlands, and what should the annual net growth increment be? (After 
gross growth has been reduced to account for mortality and removals by 
timber harvest or other forest restoration activities.) Determining a 
sustainable ASQ implicitly relies on replies to these questions.
    Economic viability--Given the high administrative planning and 
environmental analysis costs incurred by the USFS to comply with NFMA 
and the National Environmental Policy Act (NEPA)-some analysts estimate 
it to be more than half the agency's land management budget-then the 
timber sale program probably is not economically viable. As noted in 
the reply to an earlier question, the USFS has never been able to 
demonstrate that the timber sale program was profitable.
    Social acceptability--Although society has not deliberated the 
question of what a sustainable NFS timber harvest level would be, 
segments of society have used planning and environmental laws to sue 
the Forest Service seeking to stop timber sales. Courts have often 
interpreted the laws in the plaintiff's favor.
    Question 3. In your testimony you talked about changing the rules 
as a way to increase timber production while also addressing our 
wildfire/forest health problem. Will you further explain what rules and 
how they must be changed?
    Answer. Yes, gladly. The question addresses two parts of what I 
described as the triple-win from active forest management: improved 
conditions and useful products. The third part is creation of family-
wage employment. Before responding directly to the question of rule 
changes that could advance the triple-win concept, a brief digression 
provides a description of and a prescription for the wildfire/ forest 
health problem that may provide useful context.
    Wildfire/forest health problem. Western forests evolved in the 
presence of fire, thus are what ecologists call fire-adapted. By 
excluding fire from forests for a century through very effective fire 
suppression activities, the fuel complex has been altered. Fuel loads 
are at unprecedented high levels and wildfires have become larger and 
less controllable than at any time in a century. Ways to improve the 
situation are well known: Either return fire to the landscape at 
something approximating the historic fire regime, or where that is too 
dangerous or not socially acceptable, use a fire surrogate to reduce 
hazardous levels of fuel-i.e., remove woody vegetation using logging 
equipment. Even if it is desirable to restore fire everywhere, the USFS 
points out that at least 12 million acres need mechanical treatments, 
i.e., logging, to remove vegetation before restoring fire would be 
considered reasonably safe. The agency is doing about 250,000 acres of 
mechanical treatments per year and producing 2.5 BBF/year. At that rate 
it will take 48 years to do the mechanical treatment part of 
restoration, and because vegetation grows back the mechanical 
treatments will need to be repeated to keep fuel loads below hazardous 
levels if fire does not return as expected soon after fuel treatments. 
If the ASQ of 6 BBF/year were harvested only from these 12 million 
acres of lands needing mechanical treatment, then the program of 
restoration work would take 20 years instead of 48.
    The trust model--It seems foolish to wait any longer to begin a 
program of accelerated restoration; however, the federal budget 
situation is tricky, to put it mildly, and sustainable forest 
management must be economically viable. The idea that revenues from 
timber sales should be dedicated to fund forest restoration work may be 
a heretical non-starter for some people, but those with open minds 
should consider that the principles underpinning the trust land 
management model do not necessarily mean that linking timber revenues 
to specific programs, whether it be county payments or forest 
restoration work, creates an unsustainable situation. Based on her 
important and insightful book on State Trust Lands, Sally Fairfax, 
professor emeritus of the University of California-Berkeley, concluded 
that the trust land management model was more likely to attain 
sustainability than the current system.
    Rule changes--If trust land managers had to deal with all the same 
rules that NFS managers must comply with today, society should not 
expect outcomes that are much different than what the NFS lands are 
currently providing for society. I would describe that as overstocked 
forests waiting to burn in unprecedented large and uncontrollable 
wildfires, like those in 2000, 2006, 2007, and 2012, each successive 
year topping the previous record of acreage burned in the west while 
the average number of wildfires per year has remained relatively 
constant for the past three decades. Tens of millions of timberlands 
are in an unsustainable condition and managed passively rather than 
actively.
    Redo the NFMA statute. The USFS has tinkered with NFMA regulations 
numerous times and still failed to provide a sustained yield of 
multiple goods and services while forest conditions have worsened. The 
NFMA diverts scarce resources to creating planning documents that are 
chiefly useful for the maps that designate dominant-use areas where 
timber can be harvested and motorized recreational vehicles can go. Pay 
careful attention to the NFMA diversity mandate. Redefining the ASQ 
mandate and a new set of criteria describing where and when timber can 
be harvested would help.
    Put land managers in charge of land management, not courts. These 
changes would help: Reduce the need for land managers to shuffle papers 
in the office and get them out on the land where they can improve 
landscape resiliency by removing hazardous fuels. Healthy Forest 
Restoration Act mechanisms should be used more widely.
    NEPA requirements are burdensome and expensive. Administrative 
approaches to NEPA reform have not made much difference. Some 
instructions from Congress could help. Create categorical exclusions 
for fuel treatment projects designed to improve wildfire resiliency 
across large landscapes. If there are to be such things as NFMA land 
and resource management plans, exempt them from NEPA analysis. These 
planning documents describe dominant use areas as guides to actions 
across multi-million acre planning units, not decision documents for 
taking action. Such actions are proposed in smaller-scale projects, but 
wisdom currently emerging on NFS lands in South Dakota and Arizona is 
that NEPA analysis needs to be done at the scale of hundreds of 
thousands of acres, which is at least an order of magnitude greater 
than more customary project size of several thousand acres. The 
wildfire/forest health problems are large-scale and so must be the 
creative approaches to improve problem situations.
    Conclusion--I appreciate the senators' questions and the 
opportunity to respond to them thoughtfully. I hope some of these ideas 
will improve the way NFS lands are managed. That is a common interest 
shared by citizens across the U.S., but especially in the western 
states where the NFS dominates the landscape, and in no other state as 
much as Idaho. Trust land management works, and today's managers are 
just as innovative as those who initiated the federal land management 
systems. If managers were freed from expensive administrative burden 
they would be able to demonstrate the good things they are capable of 
doing. Try some pilot projects with the trust model, and do it at a 
large scale. A ranger district here and there will not be enough, as 
the Valles Caldera Trust demonstrates. A four million acre area, such 
as the Clearwater-Nez Perce NF planning unit in north-central Idaho, or 
the Boise-Payette-Sawtooth NF unit in southern Idaho, is the right 
scale. So are the Fremont-Winema, Okanogan-Wenatchee, Tongass, Medicine 
Bow-Routt, and Uinta-Wasatch-Cache. And there are many others.
                                 ______
                                 
      Responses of Paul Pearce to Questions From Senator Murkowski

    Question 1. Do you agree with the assertion that Secure Rural 
Schools payments have promoted economic diversification? Has recreation 
or other public land uses been able to replace the loss of the timber 
economy in your experience?
    Answer. We do not believe that SRS payments have promoted economic 
diversification in most of the counties receiving it. Economic 
diversity requires long range planning and land base available for 
infrastructure. Many of these counties are just holding on and look to 
the forests to be the economic engines they were intended to be and 
once were. Sustainable forest management is the only way they will 
achieve economic diversification
    We do think that projects under Title ll have contributed to the 
economy of local communities. However they do not even scratch the 
surface that is required to have healthy and resilient forests.
    Recreation on the forest and tourism in general cannot replace the 
economy that existed prior to the agencies decisions to stop managing 
these lands. We say in Skamania County that when the Skamania Lodge was 
built (private-county-federal partnership) that they eliminated family 
wage jobs in the forest and created service wage jobs at the lodge. 
Clearly this was backwards.
    Question 2. You testified that although you and your organization 
want to see more active management of the forests on federal lands you 
also want to see secure rural schools payments continue as a bridge.
    What kind of forest management reforms does your organization 
support and want to see implemented in forests on federal lands? What 
is your organization's definition of ``bridge'' funding? How many years 
of secure rural schools payments are an adequate ``bridge'', when some 
counties have received payments for more than two decades?
    Answer. The counties did not make the decision to stop managing our 
public lands. My organization has proposed, since its inception in the 
late 90's, that we must restore the economic engine that these forests 
represent. Our principals on what we need in forest management 
legislation are attached to my written testimony and I repeat them 
here;

   Improving the efficiency for planning and implementation 
        will reduce total management costs and leverage funds to 
        accomplish more forest restoration.
   An investment in forest health restoration, which is an 
        investment in rural economies, can save millions of dollars in 
        state and federal funds by creating jobs and avoiding costs 
        associated with wildfire suppression, social service programs 
        and unemployment benefits.
   Efforts to accelerate the pace of forest health projects 
        must include watershed scale projects that provide for less 
        expensive and faster planning.
   Partners in planning a forest health project should be able 
        to assume certain technical assistance roles in project 
        planning. State and tribal forestry departments can play a role 
        in project delivery. This could include parts or all of 
        restoration, forest health, silviculture and harvesting; 
        (application of Good Neighbor Authority).
   Stewardship contracting should be extended and include the 
        requirement that Counties and Schools receive shared revenues 
        on the gross project value as is required on any other 
        receipts.
   There should be the necessary authority to pursue markets 
        and investments to utilize forest restoration byproducts as 
        part of watershed level and larger forest health projects.
   Allow third parties to pool funding and prepare the NEPA 
        review for watershed level and larger projects.
   Increase involvement among environmentalists, forest 
        products industry, counties and the federal land managers to 
        create the agreement for NEPA to be protected against appeals 
        and litigation.
   The Healthy Forests Restoration Act, which passed Congress 
        overwhelmingly in 2002, should be applied more broadly.

    Bridge funding should be continued until the Agencies meet their 
obligations to these communities. As you're questioning of the Chief 
proved, even with a specific forest plan, requiring specific 
deliverable's, the Forest Service somehow falls short. Imagine that 
same conversation over the nearly 20 years since the NW Forest Plans' 
adoption, the deliverables of which have never been met on any forest 
with the plans scope. We are absolutely prepared to work with congress 
to end the senseless gridlock that has the land locked up. As Gifford 
Pinchot promised ``with shared revenues no community will suffer for 
hosting these lands'' which of course is no longer the case.
      Responses of Paul Pearce to Questions From Senator Barrasso
    Question 1. Do you see NEPA and other environmental laws as 
impediments to active forest management in terms of forest restoration 
and commercial timber production?
    Answer. We believe that the use of Environmental Assessments' and 
Categorical Excemptions's, as well as expanding the use of the Healthy 
Forest Restoration Act are available now but are not used by the 
Agencies even as they were envisioned in legislation.
    Question 2. Do you and the Partnership for Rural America support 
reform of NEPA and other environmental laws as part of an SRS 
reauthorization?
    Answer. We would be willing to engage with the committee in a 
review of what is working and what is not, and we think we could be 
very constructive in finding greater efficiencies while delivering 
equal or better environmental analysis.
    Under the ESA we would argue that US Fish & Wildlife should have to 
do an all species evaluation when listing a species as threatened or 
endangered. The current ``one species at a time'' approach is clearly 
not good science.
    We would also note that the USFW now has a new rule, which they 
pushed through, which allows that on critical habitat designation they 
never again have to do a full Environmental Impact Statement but 
instead will only have to do an Environmental Assessment. If that 
authority exists in rule making we would argue that the same could be 
done for Forest restoration projects include commercial harvest.
    Question 3. In your testimony, you highlighted the issue of 
reauthorization of stewardship contracting authority and that it was 
important to have a conversation about impact on revenue sharing before 
it is reauthorized. Are you concerned that receipts from stewardship 
contracting are not currently subject to be shared with counties?
    Answer. My members are very concerned about stewardship contracting 
with no receipts. The reason has a great deal to do with Congress 
questioning the need for bridge funding or SRS and that Counties should 
return to 25% receipt driven revenue sharing.
    To have Congress say we should return to revenue sharing through 
receipts while at the same time authorizing Stewardship Contracting 
which allows the local District Ranger or Forest Supervisor to keep all 
proceeds from the contract for ``projects'' on the forest is at best a 
mixed message to these communities.
    Question 4. Would your organization support a reauthorization of 
stewardship contracting authority without addressing revenue sharing 
with respect to stewardship contracts?
    Answer. We are not in support at this time. My members are 
concerned about actual costs and revenue sharing potential. This would 
be facilitated by greater transparency--through the use of reporting by 
the Forest Service of the monies or goods received for the contract and 
the ``project'' costs associated with it. Currently in an actual timber 
sale the Forest Service reports the ``profit'' from the sale after 
reporting ``costs'' associated with it. This includes a line item for 
infrastructure. Using the same reporting process might solve the issue 
in that my members would then have the ability to assess the real 
impacts of these contracts. There is a second concern that the Forest 
Service will eventually be doing nothing but Stewardship Contracting 
timber sales.
                                 ______
                                 
     Responses of Ryan R. Yates to Questions From Senator Murkowski

    Question 1. If mandatory spending for PILT ends and is not 
continued and you once again become dependent on annual appropriations; 
which program is more important to your organization and the counties: 
PILT or Secure Rural School payments?
    Answer. Funding for both the Payment in Lieu of Taxes program and 
the Secure Rural Schools and Community Self-Determination Act reflect a 
longstanding federal obligation to counties encumbered by the presence 
of federal land within their jurisdictional boundaries. As both 
programs are critically important to local governments-and 
fundamentally different (in intent, application and regional impact)-
NACo is not in a position to pick and choose which Federal commitments 
the government should honor.
    NACo supports the full funding of the PILT program at its yearly 
authorized level and supports legislative and/or administrative efforts 
to modify the program to make payments to counties on a basis equitable 
to both the federal and local taxpayer that are non-discriminatory in 
nature.
    Counties must share in the benefits of economic activity on public 
lands through statutory formulas, which guarantee a percentage of all 
gross receipts to be returned to the counties where the activity 
occurs. NACo opposes any attempts to lessen the revenue sharing 
receipts.
    Question 2. Headquarters Economics proposed combining secure rural 
schools and other revenue sharing with PILT as part of a single payment 
that would be paid to counties. At the hearing you indicated that the 
National Association of Counties does not support combining PILT with 
SRS. Please explain why the National Association is opposed to 
combining PILT and SRS into a single payment program. Does that 
opposition extend to combining PILT with other revenue sharing 
programs/activities (e.g. oil and gas production), why or why not?
    Answer. As PILT is not a revenue sharing program, NACo opposes the 
combination or consolidation of PILT with other federal resource based 
revenue sharing programs. The basis for annual PILT payments is federal 
ownership of lands that are not subject to local taxation. 
Additionally, unlike most revenue sharing programs, PILT funds are used 
by local governments as general fund dollars to be used for any 
governmental purpose. Typically, revenue sharing program funds are 
earmarked for a specific use tied to a resource activity (i.e. SRS 
Title I funds can only be used for county road projects).
    One of the primary reasons for the creation of the PILT program was 
the passage of the Federal Land Policy and Management Act-which 
specifically established that disposal of public lands would largely 
cease. Annual PILT payments reflect the United States governments' 
commitment to local governments to make payments in lieu of local 
property taxes. If annual PILT payments are unable to be funded by 
Congress, other options for the U.S government to consider could 
include: 1) direct invoices from local governments based on actual 
property tax rates, and 2) the disposal of federally owned property to 
private ownership (which is subject to local property taxes)
    The consolidation of PILT and other federal revenue sharing 
programs would also politicize an otherwise apolitical and 
straightforward program by tying resource extraction activities - which 
have become politically contentious in recent years-to a tax 
equivalency program.

       Response of Ryan R. Yates to Question From Senator Manchin

    Question 1. Like many of my colleagues, I understand the importance 
of PILT and SRS to local and county governments in West Virginia and 
across the United States.
    Today the Committee has heard a number of proposals to reform both 
programs.
    I want to know what you, as a representative from the National 
Association of Counties, think is the single most important reform 
measure we can make in Congress to these programs.
    Answer. In terms of the SRS program, the most important reform 
would be to couple future forest payments to counties and active 
natural resource management to provide for the stability and well-being 
of forest counties and communities. NACo urges a new direction in the 
management of our federal forests, for the very health of the forests 
themselves, and for job opportunities and social and economic 
sustainability in rural America.
    While some form of ``bridge funding'' to maintain solvency in our 
counties will be required, particularly given the dominance of federal 
forest presence in many counties, it is essential that Congress mandate 
active sustainable forest management to achieve necessary revenues (for 
counties and the taxpayer) and resilient forest lands managed by the 
United States government.
    For the PILT program, NACo supports the elimination of population 
caps from the formula. The use of population caps discriminates against 
rural counties with small population and fails to accurately 
demonstrate the actual population of people being served by the county 
government.
    Additionally, Congress should eliminate the use of ``prior-year 
payment'' reductions from the formula. The government should not reduce 
its tax obligation to county governments, solely because of other land 
management revenue agreements between governments.

     Responses of Ryan R. Yates to Questions From Senator Barrasso

    Question 1. The National Association of Counties has stated in the 
past that the federal government has failed to effectively manage our 
federal lands. Does the National Association of Counties still believe 
this is the case? If so, in what ways has the federal government failed 
to effectively manage our federal lands?
    Answer. Management activities on the USDA Forest Service 193 
million acre estate have steadily declined over the past two decades. 
Forest Service revenues from management activities (including grazing, 
timber, minerals, recreation, power, and special-use permits) have 
declined from total revenues of $1.385 billion in FY1990 to $186.4 
million in FY2010.
    Due to the agency's loss of productivity, Congress has had to make 
mandatory payments to counties (via the Secure Rural Schools program) 
in lieu of sharing revenue at a cost of roughly $350-500 million / 
year. Additionally, local forest communities have suffered from steep 
economic declines from the loss of resource-based employment which has 
led to increases in unemployment rates, declines in state gross 
domestic product, and in many cases-population reductions in rural 
communities.
    Additionally, NACo is concerned that while Congress has struggled 
to manage the federal estate while meeting longstanding financial 
obligations to states and counties, the government continues to seek to 
enlarge the federal estate and limit public access and use through 
special use designations.
    NACo opposes federal land management agency actions that limit 
access and multiple use of lands that otherwise would be available to 
the public (i.e. defacto wilderness). NACo opposes Executive Branch 
efforts to designate de facto wilderness, or federal restrictions not 
explicitly enacted on use of public or private lands in proximity to a 
designated wilderness or a Wilderness Study Area without congressional 
approval. NACo supports amending the Antiquities Act to provide 
transparency and accountability in the designation of national 
monuments. Federal consultation with state, county, and tribal 
governments should be required prior to the development and designation 
of any national monument.
    Question 2. Does NACo believe that the relationship between forest 
management and revenue for counties creates a perverse incentive to 
advocate for unsustainable logging on our public lands?
    Answer. No. NACo maintains that Federal forest payments to counties 
should be coupled with active natural resource management. NACo 
supports the relationship between sustainable natural resource 
management and the stability and well-being of forest counties and 
communities.
    Question 3. Does NACo support re-linking receipts and forest 
management?
    Answer. While counties are deeply grateful for the financial 
lifeline of the Secure Rural Schools & Community Self-Determination Act 
(SRS), NACo urges a new direction in management of our federal forests, 
for the very health of the forests themselves, and for job 
opportunities and social and economic sustainability. While some form 
of ``bridge funding'' to maintain solvency in our counties will be 
required, particularly given the dominance of federal forest presence 
in many counties, it is essential that there be a new direction in 
federal forest management.
    Legislation that provides bridge funding to forested counties and 
school districts while economic vitality is restored in these 
communities is vitally important and essential. Also, for there to be 
economic vitality, Congress must mandate active sustainable forest 
management to achieve resilient forest lands managed by the United 
States government.

       Response of Ryan R. Yates to Question From Senator Heller

    Question 1. In your oral testimony, you indicated that the National 
Association of Counties would oppose the combining of the PILT and 
Secure Rural Schools programs. Could you please elaborate on the 
rationale behind NACo's position?
    Answer. As PILT is not a revenue sharing program, NACo opposes the 
combination or consolidation of PILT with other federal resource based 
revenue sharing programs. The basis for annual PILT payments is federal 
ownership of lands that are not subject to local taxation. 
Additionally, unlike most revenue sharing programs, PILT funds are used 
by local governments as general fund dollars to be used for any 
governmental purpose. Typically, revenue sharing program funds are 
earmarked for a specific use tied to a resource activity (i.e. SRS 
Title I funds can only be used for county road projects).
    One of the primary reasons for the creation of the PILT program was 
the passage of the Federal Land Policy and Management Act-which 
specifically established that disposal of public lands would largely 
cease. Annual PILT payments reflect the United States governments' 
commitment to local governments to make payments in lieu of local 
property taxes. If annual PILT payments are unable to be funded by 
congress, other options for the U.S government to consider could 
include: 1) direct invoices from local governments based on actual 
property tax rates, and 2) the disposal of federally owned property to 
private ownership (which is subject to local property taxes)
    The consolidation of PILT and other federal revenue sharing 
programs would also politicize and otherwise apolitical and 
straightforward program by tying resource extraction activities--which 
have become politically contentious in recent years--to a tax 
equivalency program.
                                 ______
                                 
      Responses of Thomas Tidwell to Questions From Senator Wyden

    Question 1. Thank you for showing your support at the hearing for 
both Secure Rural Schools and for getting the timber cut up. I 
understand your point that the Forest Service could not sell enough 
timber today to replace County payments, and that is why I am 
advocating for a two-pronged approach: a short-term extension of County 
payments while we rejuvenate the Agencies' timber programs. In your 
testimony, you pointed out that 16.8 billion board feet is the amount 
of timber that would need to be sold today to fund County payments in 
FY 2014. In the entire history of your Agency, has the Forest Service 
ever sold in a single year that much timber? What is the most amount 
oftimber the Forest Service has ever sold in a year? During the period 
when the Agency was conducting its highest years of timber harvesting, 
what was the average annual volume of timber offered for sale?
    Answer. The agency sold 19.5 BBF (billion board feet) in 1969. 8 
BBF ofthis amount was in one long term contract offering in Alaska. 
Between 1970 and 1988 the average volume of timber offered for sale was 
12.6 BBF and the average sold volume was 11.0 BBF.
    Question 2. Chief Tidwell, I appreciate your sharing my commitment 
to get the timber cut up. I know there are a number of ideas 
circulating about ways to accomplish that, but one idea that seems like 
a no brainer to me involves the Forest Service's appeals and objection 
process. Over a year ago, you started to update the Agency's 
regulations concerning the use of its pre- decisional objection 
process. When will you finalize these regulations, enabling restoration 
projects to be expedited and the role of public involvement to be 
firmed up?
    Answer. The final rule was published in the Federal Register on 
March 27, 2013 at https://www.federalregister.gov./articles/2013/03/27/
2013-06857/project-level-predecisional-administrative-review-process.
    Question 3. Dr. Jay 0'Laughlin, a witness from the second panel, 
testified that placing National Forests lands into trusts could be an 
effective way to achieve more harvests and revenues, citing the Valles 
Caldera as an example. I understand the trust was created from a 
private ranch and was created to protect the ranch and be self-
sustaining. Is the Valles Caldera the only example of the Forest 
Service operating its lands through a trust? For what purposes was the 
trust created and how does it differ from the purposes of state trust 
lands and other Forest Service lands?
    Answer. The Valles Caldera Preservation Act provided for the 
acquisition of the 88,900 acre Baca Ranch in the Jemez Mountains ofNew 
Mexico into the National Forest System. The purpose of the Valles 
Caldera National Preserve (VCNP) is to protect and preserve the 
scientific, scenic, geologic, and other resource values of the 
Preserve, and to provide for multiple use and sustained yield of 
renewable resources and. to be a working ranch. It was established as a 
demonstration area for an experimental management regime, which 
incorporates both public and private administration elements. The Act 
also established the Valles Caldera Trust (VCT) to provide 
administrative and management services, establish and implement 
policies, to receive and collect funds from private and public sources, 
and to cooperate with other Federal, State, Tribal, and local 
governmental units. The VCT provides administrative and management 
services for the VCNP. The VCT is managed by a Board of Trustees that 
consists of the Forest Supervisor of the Santa Fe NF, the 
Superintendent of Bandelier National Monument, and seven presidential 
appointees. This is the only such trust within the National Forest 
System.
    VCNP differs from the purposes of other National Forest System 
lands in that it is managed by the Valles Caldera Trust and overseen by 
a Board of Trustees. In addition, the Valles Caldera Preservation Act 
has some specific provisions for the VCNP to continue as a working 
ranch and preserve the unique values of the area. Most significantly, 
the Act requires that the VCT work toward the goal of financial self-
sustainability within 15 years after the date of acquisition (e.g. 
sufficiency by 2015) or become part of the National Forest System.
    In general, state trust lands are required in state constitutions 
to be managed for the sole purpose of generating revenue for public 
schools and other public institutions in western states. These state 
trust lands have a very different mandate than National Forest System 
lands, which are managed for multiple uses and sustained natural 
resource benefits such as water quality, forest health, and wildlife 
habitat.
    Question 4. Has the Valles Caldera National Preserve been 
successful at producing enough revenues to offset its need for 
appropriation-as was originally intended?
    Answer. No-while revenues have increased since creation of the 
Preserve, they do not complet ly offset the need for appropriations. 
The table below summarizes total appropriations and revenues generated 
for Fiscal Years 2001-2012
      
    
    
    In addition, the Santa Fe National Forest provides additional 
financial support and donates work to Valles Caldera for a variety of 
activities and services, outside of the direct appropriation from 
Congress. Some of these activities include fire prevention, 
suppression, post fire rehabilitation, one half of all law enforcement 
costs, budget and finance related services, payments, accounting 
adjustments, travel, internal audits, acquisition, and grants and 
agreements.
    The VCT is making measured progress toward the attainment of the 
goals put forward in the Valles Caldera Preservation Act of2000. They 
have either met, exceeded, or are making strides toward all the goals 
articulated in the enabling legislation-including the financial self-
sufficiency. To date the VCT is recovering 30 percent of its total 
operating costs through fees and donations. In addition, 50 percent of 
the ecological restoration costs are recovered through the 
Collaborative Forest Landscape Restoration program which is funded by 
Congressional appropriations specifically for restoring forest 
ecosystems on National Forest System lands nationwide. Much of the 
remaining costs for restorations have been recovered through grants 
secured through partnerships and a host of other universities, 
agencies, and organizations. The recreation programs are either 
profitable, breaking even or are closing the gap.
    Question 5. What are the total collections ofthe Forest Service for 
each of the last 5 fiscal years? For each fiscal year, please by type 
of receipt (timber, recreation, etc.) and state.
    Answer. As was agreed to by the Committee staff, since the amount 
of data requested here is very large, it is most efficient to use the 
website at www.fs.usda.gov/pts. Once at the Secure Rural Schools 
website, go to the ``related links'' on the right side, and choose 
``annual payment information.'' This will take you to a listing of the 
many reports available; scroll down until you find the ASR 13-2 Report 
for each year that you are interested in the receipts.
    Responses of Thomas Tidwell to Questions From Senator Murkowski
    Question 1. I have heard from counties and other stakeholders all 
over the country that we need to more actively manage our forests both 
for forest health and for commercial timber production. Yet even where 
there is stakeholder agreement on what needs to be done, the Forest 
Service is not getting the job done. Can you explain why the Forest 
Service is having such a difficult time increasing the work being done 
on our national forests both in terms of forest restoration and 
commercial timber production? What role does litigation and 
environmental compliance requirements play?
    Answer. We agree that more restoration work needs to be done on the 
national forests. Over the last few years the Forest Service has 
increased timber volume sold, achieving the target of 2.64 billion 
board feet in 2012. The FS exceeded a number of restoration targets in 
2012, such as moving 9 watersheds to an improved condition class 
(target was 5 watersheds); decommissioning 2,103 miles of road (target 
was 2,028 miles); and restoring/enhancing 3,704 miles of stream habitat 
(target was 2,670 miles).
    The FS continues to explore new and existing tools to become more 
efficient; collaboration is helping. Across the country a multitude of 
collaborative efforts are reducing polarization and leading to 
increased outputs. The Forest Service continues to reach out to groups 
that find themselves hesitant to collaborate in an effort to reach 
common goals.
    Litigation and environmental compliance requirements affect the 
quality and quantity of our work. Meeting environmental compliance 
requirements adds value to our decision making and public involvement, 
but it also adds time. We are working to make these processes more 
efficient and effective.
    Litigation affects the work in two ways-projects are put on hold 
either under court order or under the threat of potential litigation. 
Approximately two percent of the decisions made each year are brought 
to litigation. While this is a small percentage, the threat of 
potential litigation often adds to the workload by increasing the data 
collected and analyzed in order to lessen legal vulnerability.
    Other factors are involved in the amount of restoration work that 
can be done. Staffing within the agency has shifted to reflect an 
increased focus on fire. Since 1998 fire staffing within the Forest 
Service has increased 110 percent. Over the same time period, National 
Forest System staffing has decreased by 35 percent and Forest 
Management staffing has decreased by 49 percent.
    Fire transfers occur when the agency has exhausted all available 
funding from the Suppression and FLAME accounts. Six times from FY 2002 
to FY 2012, the Forest Service has made fire transfers from 
discretionary, mandatory, and permanent accounts to pay for fire 
suppression costs in amounts ranging from $100,000,000 in FY 2007 to 
$999,000,000 in FY 2002, and totaling approximately 2.7 billion. Of 
that total, $2.3 billion was eventually repaid but the transfers still 
led to disruptions within affected Forest Service programs. In FY 2012, 
the Forest Service transferred $440 million to the fire suppression 
account for emergency fire suppression due to severe burning conditions 
and increasing fire suppression costs. Projects at all levels of the 
organization were deferred or cancelled as a result of the transfers.
    Each time the agency transfers money out of accounts to pay for 
fire suppression there are significant and lasting impacts across the 
entire Forest Service. Not only do these impacts affect the ability of 
the Forest Service to conduct stewardship work on national forests, 
they also affect our partners, including local governments and tribes.
    Question 2. You testified at the hearing that the Forest Service 
would need to cut 16.2 billion board feet a year to provide the 
revenues needed to meet the current Secure Rural Schools payment 
levels. It is my understanding that to reach that number the Forest 
Service included prices for personal use firewood, sale of decked logs 
from road construction, and other nonconvertible products like 
Christmas trees, floral greens, and other things not really considered 
timber. What sale level would be required if your volume accomplishment 
reporting only counted commercially valuable sawtimber, pulpwood and 
biomass where markets exist?
    Answer. The calculation of 16.2 billion board feet did not include 
the value of nonconvertible products, such as Christmas trees, floral 
greens, and other things not really considered timber. It did include 
the value of firewood, posts, poles, non-sawtimber, and ties in the 
current program. If only the value of sawtimber, pulpwood and biomass 
were used in the calculation for the additional volume needed to cover 
the payment, then an additional 11.3 billion board feet would need to 
be added to the current program for a total of 13.9 billion board feet.
    Question 3. I am told that the Forest Service spends $100 or more 
per million board feet (mbf) to prepare and implement a timber sale 
while a state sale on average costs only $25 per mbf. Why do federal 
timber sales cost so much more?
    Answer. Currently, the Forest Service national average for 
preparing and implementing (administering) timber sales is about $90 
per MBF. This varies considerably by region from a low of $55 per MBF 
to just under $180 per MBF. These costs include all timber sale related 
costs at the regional, forest and district offices. It also includes 
the cost of surveys, inventories, environmental analysis and disclosure 
(NEPA), sale layout, volume and value determination, contract 
preparation and award, and sale administration. In addition, costs 
associated with appeals and litigation, rework of timber sales, and 
administration of personal use for firewood and special forest products 
are included.
    The statutes and regulations that govern state timber sales are 
different than those for federal timber sales. Most states are mandated 
to generate revenue for schools from their state trust lands. This 
usually results in states selecting the larger and more valuable trees 
to harvest resulting in higher volumes per acre and lower unit costs. 
Federal timber sales are integrated with other resource objectives 
under their multiple use mandates.
    The agency has been implementing measures to reduce the cost of 
preparing and implementing timber sales. The unit costs per MBF have 
decreased by approximately 23 percent since 1998 when adjusted for 
inflation.

      Response of Thomas Tidwell to Question From Senator Manchin

    My state of West Virginia is home to about 1 million acres of SRS 
eligible land and 1.2 million acres of PILT eligible land.
    In 2012 alone, West Virginia received nearly $3 million in PILT 
payments and more than $1.7 million in SRS payments.
    West Virginia is also a largely rural state and the expiration of 
the SRS program will have a greater impact on us than it will more 
populated states.
    Question 1. In the second panel today, we will hear from Mark 
Haggerty with Headwaters Economics. Are you familiar with his proposals 
for a single payment model and his proposal to increase the population 
limit for rural counties? If so, what is your opinion on these 
proposals?
    Answer. The United States Forest Service has not analyzed the 
Headwaters proposal and does not have an opinion at this time.

     Responses of Thomas Tidwell to Questions From Senator Barrasso

    Question 1. The Forest Service has stated that IRR reduces unit 
costs. What evidence can you provide the Committee to verify the 
statement particularity as it relates to timber production?
    Answer. The Forest Service is evaluating the operational 
efficiencies of IRR in several ways: Regional Annual Reports which 
include case studies from each region documenting accomplishments, 
successes and challenges; reviewing performance measures to identify or 
develop those that help measure restoration outcomes; and contracting a 
third party evaluation of IRR. The Agency has initiated a third-party 
monitoring of IRR with Colorado State University and the University of 
Oregon; it will begin June 2013 and be completed by March 2015.
    IRR is a budget consolidation tool designed to help promote 
restoration activities on NFS lands. IRR aligns funding with program 
and policy direction from the Secretary of Agriculture reinforcing the 
agency's commitment to accomplish work more efficiently through 
collaboration and an ``All Lands'' restoration approach. IRR 
facilitates and supports an integrated approach to land management that 
maintains, enhances, or restores watersheds at the landscape level to 
improve their resilience. Through this alignment of funding, the Forest 
Service expects to gain administrative efficiencies which will increase 
our ability to accomplish more on-the-ground work, enhance outcomes, 
and contribute, enhance, and maintain restoration related jobs with 
IRR.
    IRR is only a part of our effort to gain efficiencies. We are 
pursuing other avenues as well, such as by gaining efficiencies through 
our NEPA and timber sale preparation program. When adjusted to 
inflation, funding has been reduced by 185 million dollars since 1998 
and staffhas been reduced by 49 percent. But during the same time we've 
had to reduce our unit costs for a thousand board feet by 23 percent. 
We want to be able to continue to do that work and IRR could help the 
Forest Service to gain more efficiencies.
    Question 2a. Region 1 has seen a higher amount of collaboration 
efforts that you spoke about at the hearing. The region also enjoys 
Stewardship Contracting, and is an IRR pilot region with several CFLRA 
pilot projects. Can you explain to me why nearly half the timber volume 
they offered for sale was enjoined in 2012?
    Answer. There are a handful of environmental groups that constitute 
almost all of the recent litigation in Region 1. These groups do not 
appear to have an interest in collaborating. The current and past 
Regional Forester and other Forest Service personnel have reached out 
to several of these groups. The response is that they do not support 
commercial timber harvest on National Forest lands, and suggest that 
commercial harvest activities should be separated from the activities 
they support, e.g., road decommissioning, fish passage work- even in a 
stewardship contract where the sale of timber would likely increase 
those restoration activities with goods for services, and/or through 
the use of retained receipts.
    Question 2b. With Stewardship Contracting, collaboration efforts, 
and an IRR pilot, why does Region 1 have the lowest attainment of 
timber output in the lower 48 among Forest Service regions?
    Answer. The region has prepared sufficient volume for offer, but 
litigation is currently affecting the Region's ability to meet timber 
volume sold targets. Seven projects have been the subject of litigation 
and the Region is in the process of working with the respective 
Forests, OGC, DOJ and the Washington Office to move forward with 
advertising, bid opening and award.
    Question 2c. Why do they have the highest unit cost per unit of 
wood produced?
    Answer. If the Region had achieved its target, unit costs would be 
comparable to neighboring regions; however, it was unable to sell 
everything it had prepared due to litigation. The overall expenditure 
for planning/NEPA is estimated at approximately 60-70 percent of the 
funds allocated for the program. Because of the litigious environment a 
large amount oftime is spent in analysis and documentation in order to 
prevail in legal challenges, even prevailing on 11 out of 12 issues can 
still result in injunctive relief or further delays, as evidenced in a 
recent decision (Colt Summit). The remaining 30 percent of funds covers 
sale preparation, sale administration, etc.
    The region has gained efficiencies through the use of the timber 
sale strike teams for which unit costs are nationally competitive. In 
addition, in order to increase success in litigation, the region has 
implemented a host ofNEPA efficiency initiatives.
    Question 3. With more of the timber sale program being sold through 
Stewardship contracts there is less revenue being returned to the 
counties where it was generated. Understanding from the hearing that 
every little bit of funding helps counties, and with an eye towards 
renewing stewardship contracting, how do you see the relationship 
between Federal lands and their neighboring units oflocal government 
evolving under Stewardship contracting?
    Answer. Stewardship contracting allows the receipts from the timber 
to pay for restoration activities in the sale area, generating more 
work on the ground and providing more local jobs. The Forest Service is 
committed to increasing the pace of restoration and job creation, with 
available resources. The Collaborative Forest Landscape Restoration 
Program, which relies heavily on stewardship contracting, created and 
maintained an estimated 3,375 part- and full-time jobs during 2011 and 
4,574 part- and full-ime jobs during 2012. The FY 2014 budget proposes 
to achieve an output of2.38 billion board feet of timber volume sold, 
2,000 miles of road decommissioned, and 3,100 miles of stream restored 
predominantly in timber dependent counties. The Forest Service is also 
creating jobs by expanding markets for forest products. The FY 2014 
President's Budget also proposes to allocate $10.5 million to Wood to 
Energy Initiatives which support wood energy project design, pre-
construction activities and construction.
                                 ______
                                 
       Response of Pamela K. Haze to Question From Senator Wyden

    Question 1. What are the total collections (royalties, rentals, 
bonus bids, fees, and other payments) made by the Department of the 
Interior for each of the last 5 fiscal years? Please provide a chart 
displaying the amount and type of each the collection. With respect to 
payments relating to minerals, please specify the collection by type 
(e.g., OCS oil and gas bonus bids; Federal onshore oil and gas 
royalties, etc.).
    Answer. A historical table showing Department of the Interior 
receipt collections for 1982-2013 est. is provided which displays the 
source of the receipt by type.
    Question 2. What payments are made by the Department to the states? 
To counties? Please specify the source of the payment (e.g. State share 
of Federal coal receipts; PILT payment; County share of Federal 
geothermal receipts). Please specify total payment by state and where 
relevant, by county. Please provide this information for each of the 
last five fiscal years.
    Answer. State and county receipt information for mineral, grazing 
and timber revenue payments is provided in the table State and County 
Disbursements 1999-2012. More detailed information regarding State by 
State disbursements from Federal on and offshore oil and gas production 
are provided in the tables on Federal Onshore and Offshore Oil and Gas.
    State information on PILT payments, which are derived from the 
General Treasury rather than receipts, is provided on the PILT State 
Reports 1978-2012. County specific information for BLM Secure Rural 
School payments in years 2000-2011 are available on-line at http://
www.blm.gov/or/rac/ctypaypayments.php.

    Responses of Pamela K. Haze to Questions From Senator Murkowski

    Question 1. Alaska is the largest state in the United States. It 
has approximately 229 million acres of land in federal ownership, more 
than any other state in the country. As a result, PILT payments make up 
the largest percent of federal land payments in Alaska. Yet Alaska has 
the lowest average per acre payment in the country. What changes would 
have to be made to the PILT formula to correct this inequity and ensure 
that Alaska counties get compensated fairly for the impacts federal 
lands have on the tax base and their local economies?
    Answer. The Department of the Interior computes Payments in Lieu of 
Taxes payment amounts using the formula that is dictated by statute. 
Section 6902 of the Payments in Lieu of Taxes Act (P.L. 97-258) directs 
the use of the greater of two alternatives that consider the number of 
acres of qualified Federal land in the county (or local jurisdiction) 
and considering a population ceiling limitation and prior year revenue 
payments retained by the county. The population ceiling factor provides 
a higher allowance for more highly populated counties. Alaska's 
payments reflect this effect, whereby less populated counties receive a 
lower allowance.
    Modification of the formula would be necessary to change the 
allocation to less populated jurisdictions. Congress would need to 
enact legislation in order to modify the formula.
    More information on the PILT program can be found at http://
www.doi.gov/pilt/faqs.cfm
    Question 2. In your testimony you describe the calculation for PILT 
payments and that certain federal land payments received by a county or 
local jurisdiction in the preceding year are counted against future 
PILT payments, thereby reducing the PILT payment. What federal land 
payments count against future PILT payments and is this uniform for all 
counties receiving PILT payments nationwide?
    Answer. Certain Federal payments are considered in the calculation 
of PILT entitlement amounts. The prior year payment amount made under 
the authority of these programs is deducted in the derivation of the 
PILT entitlement for the current year. Not all Federal payments are 
considered, only those that are specifically named in the PILT Act, 
including the Refuge Revenue Sharing Fund, the National Forest Fund, 
the Taylor Grazing Act, the Mineral Leasing Act for acquired lands, the 
Federal Power Act, and the Secure Rural Schools and Community Self-
Determination Act of 2000. All counties are treated equitably in the 
application of this reduction. The PILT Act requires the governor of 
each state to report the payments retained by counties or other local 
jurisdictions in the state to DOI each year.

     Responses of Pamela K. Haze to Questions From Senator Manchin

    Question 1. My state of West Virginia is home to about 1 million 
acres of SRS eligible land and 1.2 million acres of PILT eligible land.
    In 2012 alone, West Virginia received nearly $3 million in PILT 
payments and more than $1.7 million in SRS payments.
    West Virginia is also a largely rural state and the expiration of 
the SRS program will have a greater impact on us than it will more 
populated states.
    In the second panel today, we will hear from Mark Haggerty with 
Headwaters Economics. Are you familiar with his proposals for a single 
payment model and his proposal to increase the population limit for 
rural counties? If so, what is your opinion on these proposals?
    Answer. The Department and the Administration support 
reauthorization of the Secure Rural Schools and the Payments in Lieu of 
Taxes programs. Changes to the population ceiling used in the PILT Act 
would modify the allocation of PILT funds, benefitting some 
jurisdictions and disadvantaging others. As part of the reauthorization 
process, the Department would be available to evaluate the impacts and 
outcomes of specific legislative proposals. Speculation about the 
impacts, the pros and cons, and the benefits of one proposal is 
premature without a full understanding of the exact changes proposed 
and how they would be implemented and funded.

     Responses of Pamela K. Haze to Questions From Senator Landrieu

    Question 1. Can you provide a breakdown, program by program, of all 
money collected by the Department of the Interior over the course of 
FY2012?
    Answer. A breakout of the Department's FY 2012 receipts is provided 
in the accompanying historical table of Department of the Interior 
receipt collections.
    Question 2. Can you provide a state-by-state breakdown of these 
funds, i.e. Texas contributed X in onshore oil and gas revenues- again, 
for every program from which the Department of the Interior collected 
revenues, including offshore oil and gas development?
    Answer. The information for FY 2012 is included on the following 
historical tables provided: State and County Disbursements 1999-2012; 
Federal Onshore Revenues by State 1999-2012; and Federal Offshore 
Revenues by State 1982-2012. The Federal Onshore and Offshore tables 
provide greater detail of the payments in the State and County 
Disbursements table.
    Question 3. Can you provide historic data, for each individual 
program, beginning with the enactment date for each respective program, 
of all funds collected by the Department of the Interior? i.e. - from 
19XX, when revenue collection for onshore oil development began, the 
Department of the Interior has collected the following amounts: $XXXX 
in 1920, $YYYYY in 1921, etc.
    Answer. Provided is a table showing the historical data for the 
Department's receipts collections dating back to 1982. Data prior to 
that point is not readily available.
    Question 4. Can you provide this historic data on a state by state 
basis?
    Answer. The historical data on a state by state and county basis 
for mineral, grazing and timber revenue payments is provided in the 
table State and County Disbursements 1982-2012. More detailed 
information regarding State by State disbursements from Federal on and 
offshore oil and gas production are provided in the tables on Federal 
Onshore and Offshore Oil and Gas.
    Question 5. Can you provide a list of the legislation that created 
or defined each revenue generating program?
    Answer. A full list of the statutory authorities for the 
Department's mineral revenue and disbursement accounts is provided.
    With regard to BLM payments to Oregon and California grant lands 
counties, under the Oregon and California Act of 1937, BLM paid 50 
percent of receipts from Federal activities on O&C lands (mainly from 
timber sales) to 18 counties in western Oregon. Over time, these 
revenues decreased since due to changes in Federal timber policies.
    The Secure Rural Schools and Community Self-Determination Act of 
2000 (P.L. 106-393) was enacted on October 30, 2000, to provide a 
predictable payment to States and counties, in lieu of funds derived 
from federal timber harvests. Payments were based on historical 
payments, adjusted for inflation. The Department of the Interior 
administers payments for the O&C grant lands only and the majority of 
the program is administered by the U.S. Forest Service.
    Under P.L. 106-393, payments for a fiscal year were made in the 
following fiscal year through 2007. The payments have been extended 
three times. P.L. 110-28 extended payments for 2008. Section 601 of 
Public Law 110-343, provided an extension of payments to the O&C Grant 
Lands and the Coos Bay Wagon Road counties through fiscal year 2011 
(with final payment to be made in 2012). Congress enacted Public Law 
112-141, providing an extension of payments to the O&C Grant Lands and 
the Coos Bay Wagon Road counties through fiscal year 2012 (with the 
final payment to be made in 2013),
    Question 6. Can you provide, for each of the following years, a 
heatmap (assigning a color for each county on the basis of revenues 
collected- i.e. white = $0, while purple= $maximum) of all revenues 
collected by the Department of the Interior on per-county basis 
(including OCS revenues, attributed to the respective coastal zone)- 
2012, 2002, 1992?
    Answer. Provided are heatmaps showing State revenue disbursements 
for 2012 and 2002.
    Question 7. Can you provide a breakdown, program by program, of all 
payments from Department of the Interior to states, and an explanation 
of what each program pays for?
    Answer. Detailed information regarding the programs making payments 
to states from Interior's revenue activities is provided. Historical 
data on a state by state and county basis for mineral, grazing and 
timber revenue payments is provided in the table State and County 
Disbursements 1982-2013. More detailed information regarding State by 
State disbursements from Federal on and offshore oil and gas production 
are provided in the tables on Federal Onshore and Offshore Oil and Gas.
    Question 8. Can you provide a breakdown, state by state, of all 
payments from Department of the Interior to states? i.e.- Texas 
received X amount under PILT, Y amount for onshore oil development 
revenue sharing, etc.
    Answer. The historical data on a state by state and county basis 
for mineral, grazing and timber revenue payments is provided in the 
table State and County Disbursements 1982-2013. More detailed 
information regarding State by State disbursements from Federal on and 
offshore oil and gas production are provided in the tables on Federal 
Onshore and Offshore Oil and Gas.
    PILT payments by State, which are derived from the General Treasury 
rather than receipts, are provided on the PILT State Reports 1978-2012. 
County specific information for BLM Secure Rural School payments in 
years 2000-2011 are available on-line at http://www.blm.gov/or/rac/
ctypaypayments.php.
    Question 9. Can you provide historic data of all payments to states 
from the Department of the Interior, beginning with the date of 
enactment for each respective payment program?
    Answer. A breakout of the Department's receipts is provided in the 
historical table of Department of the Interior receipt collections for 
years 1982-2013.
    Question 10. Can you provide a state by state breakdown of this 
historic data?
    Answer. The historical data on a state by state and county basis 
for mineral, grazing and timber revenue payments is provided in the 
table State and County Disbursements 1982-2012. More detailed 
information regarding State by State disbursements from Federal on and 
offshore oil and gas production are provided in the tables on Federal 
Onshore and Offshore Oil and Gas.
    Question 11. Can you provide a list of the legislation that created 
or defined each revenue generating program?
    Answer. A full list of the statutory authorities for the 
Department's mineral revenue and disbursement accounts is provided.
    Question 12. Can you provide, for each of the following years, a 
heatmap of all payments made by the Department of the Interior on per-
county basis (including OCS revenues, attributed to the respective 
coastal zone)- 2012, 2002, 1992?
    Answer. Provided are heatmaps showing State revenue disbursements 
for 2012 and 2002.

                                    

      
